CONSULTING GROUP CAPITAL MARKETS FUNDS, 485APOS, 1999-07-09

CONSULTING GROUP CAPITAL MARKETS FUNDS
485APOS, 1999-07-09

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Registration No. 33-40823
811-6318

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
X
Pre-Effective Amendment No. _______

Post-Effective Amendment No. 25 X

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940

Amendment No. 25 X

CONSULTING GROUP CAPITAL MARKETS FUNDS
(Exact name of Registrant as Specified in Charter)

222 Delaware Avenue, Wilmington, Delaware 19801
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code:
(302) 888-4104

Christina T. Sydor
Consulting Group Capital Markets Funds
388 Greenwich Street, 22nd Floor
New York, New York 10013
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: Continuous

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b) of Rule 485

on (date) pursuant to paragraph (b) of Rule 485

60 days after filing pursuant to paragraph (a)(1)

on (date) pursuant to paragraph (a)(1)

XXX 75 days after filing pursuant to paragraph (a)(2)

on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Title of Securities Being Registered: Shares of Beneficial Interest,
par value $0.001 per share.

PART A

<PAGE>

[GRAPHIC]

Consulting Group

Capital Markets Funds

Multi-Sector Fixed Income

Investments

Prospectus SALOMONSMITHBARNEY
September __, 1999 ---------------------------
A member of citigroup[LOGO]

The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a crime.

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to sell these securities
and is not soliciting an offer to buy these securities in any state where the
offer and sale is not permitted.
<PAGE>

Table of Contents
<TABLE>
<S> <C>
Investments, Risks and Performance 2
- ----------------------------------------------------------
Investment Objective 2
- ----------------------------------------------------------
Principal Investment Strategies 2
- ----------------------------------------------------------
Fees and Expenses 5
- ----------------------------------------------------------
More on the Portfolio's Investments and Related Risks 6
- ----------------------------------------------------------

The Manager 8
- ----------------------------------------------------------

Asset Allocation Programs 10
- ----------------------------------------------------------

Investment and Account Information 11
- ----------------------------------------------------------
Account Transactions 11
- ----------------------------------------------------------
Valuation of Shares 12
- ----------------------------------------------------------
Year 2000 Issue 12
- ----------------------------------------------------------
Dividends and distributions 12
- ----------------------------------------------------------
Taxes 12
- ----------------------------------------------------------
Appendix A A-1
- ----------------------------------------------------------
Appendix B B-1
- ----------------------------------------------------------
</TABLE>
An investment in the Portfolio is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

Multi-Sector Fixed Income Investments
<PAGE>

Investments, Risks and Performance

About the portfolio

The Consulting Group, a division of SSBC Fund Management Inc. ("SSBC"), serves
as investment manager for Multi-Sector Fixed Income Investments (the "Portfo-
lio"). As manager, the Consulting Group selects and oversees professional money
managers who are responsible for investing the assets of the Portfolio. The
Multi-Sector Fixed Income Investments' assets are allocated among four
subadvisors according to the following percentages: Standish, Ayer & Wood, Inc.
("Standish") -- 50%, National Asset Management Corp. ("National") -- 20%, At-
lantic Portfolio Analytics and Management, Inc. ("APAM") -- 20%, and Alliance
Capital Management, L.P. ("Alliance") -- 10%. Changes to this allocation
greater than 10% of the Portfolio's assets can only be made by the Board of
Trustees.

Investment objective

Total return consisting of capital appreciation and income.

Principal investment strategies

The Portfolio invests primarily in fixed-income securities issued by U.S. gov-
ernmental and corporate issuers and mortgage-related and asset-backed securi-
ties.

How the subadvisors select the portfolio's investments

The manager has selected four subadvisors who manage other fixed-income ori-
ented Portfolios for the manager. Each subadvisor employs the same investment
style and process to manage its portion of the Portfolio's assets as it does
when managing the assets of the other Portfolios, with one important differ-
ence. Because the Portfolio's assets are allocated among four subadvisors who
focus on different segments of the fixed income marketplace, each subadvisor
invests all of the assets allocated to it in that particular sector. Each
subadvisor's investment approach is described below.

Standish focuses on investment grade intermediate maturity fixed income securi-
ties. The average maturity of securities ranges from three to ten years. Aver-
age maturity is a weighted average of the stated maturities of the debt securi-
ties the Portfolio owns. Individual investments may be of any maturity. Stand-
ish seeks to maximize current income and minimize volatility by:

. Analyzing issuers and sectors on a yield spread basis, with an overlay of
fundamental company analysis

. Identifying fixed income securities with the greatest potential for adding
value, such as those involving new issuers, the potential for credit
upgrades, unique structual characteristics or innovative features

. Managing variables such as sector, maturity, duration, credit quality, yield
and potential capital appreciation.

National focuses on investment grade long-term fixed income securities, includ-
ing those issued by U.S. governmental and corporate issuers, U.S. dollar denom-
inated fixed income securities of foreign issuers and mortgage-backed and as-
set-backed securities. It emphasizes three key strategies to enhance the Port-
folio's total return:

. Adjusting the allocation of the Portfolio among the key sectors of the fixed
income market-government, corporate and mortgage and asset-backed-depending
on its forecast of relative values

. Tracking the duration of the overall portfolio so that it falls within a
narrow band relative to the benchmark index, with adjustment made to reflect
its long-term outlook for interest rates

. Purchasing under-valued securities in each of the key sectors of the bond
market while keeping overall quality high.

APAM focuses on mortgage-related securities representing pools of mortgage
loans assembled for sale to investors by various U.S. government agencies, gov-
ernment- related organizations and private issuers. The portfolio may also in-
vest in mortgage-related derivative securities such as government stripped
mortgage-backed securities ("SMBS") and collaterized mortgage obligations
("CMOs"). SMBS represent the right to receive either principal or interest pay-
ments of U.S. government securities. Interests in CMOs entitle the holder to
specified cash flows from a pool of mortgages. In order to enhance current in-
come, the Portfolio may enter into mortgage dollar roll transactions with re-
spect to mortgage-related securities issued by U.S. governmental agencies or
instrumentalities.

APAM uses a quantitive computer-modelled investment process to seek to identify
and capitalize on inefficiencies in the mortgage-backed securities market. APAM
generally maintains the Portfolio within a narrow band around the duration of
the entire mortgage-backed market and normally focuses on mortgage-related se-
curities

Multi-Sector Fixed Income Investments
<PAGE>

issued by U.S. government agency and government related organizations.

Alliance focuses on below investment grade fixed income securities, also known
as "high yield" securities and commonly referred to as "junk bonds." Alliance
invests primarily in fixed income securities of corporate issuers located in
the U.S., but may also invest in securities of issuers located in developed
foreign countries. It may also invest a portion of the Portfolio in equity and
equity- related securities, including convertible securities, preferred stocks,
warrants and rights.

Alliance invests primarily in fixed income securities whose average duration
ranges from four to seven years. Individual securities may be of any maturity.

Alliance employs a relative value investment process, looking for securities of
companies with improving or stable credit quality trends. It focuses on invest-
ments in the "B" quality spectrum. The investing process includes:

. Extensive research of issuers and their business conditions

. Thorough analysis of issuers and their credit quality

. Emphasis on general economic and interest rate trends and forecasts.

Credit Quality: The portions of the Portfolio managed by Standish, National and
APAM are invested primarily in securities rated investment grade by a nation-
ally recognized statistical rating organization, or, if unrated, of equivalent
quality as determined by the subadvisor. The portion of the Portfolio managed
by Alliance will primarily be invested in fixed income securities rated below
investment grade, or, if unrated, of equivalent quality as determined by Alli-
ance. Securities rated below investment grade are commonly known as "junk
bonds."

Duration and Maturity. The Portfolio's average duration is normally within one
year of the duration of the Lehman Brothers Aggregate Bond Index. Duration is
an approximate measure of the sensitivity of the market value of the Portfo-
lio's holdings to changes in interest rates. Individual securities may be of
any maturity.

3
<PAGE>

Principal risks of investing in the Portfolio

An investment in the Portfolio involves specific risks relating to the nature
of its investment strategies. You should invest in the Portfolio only if you
are capable of bearing the risks described below.

. You could lose money on your investment in the portfolio, or the portfolio
may not perform as well as other investments

. The manager's judgment about the attractiveness and risk adjusted return
potential of particular asset classes, investment styles or other issues may
prove to be wrong

. When interest rates go up, prices of fixed income securities decline

. An issuer of a security may prepay principal earlier than scheduled, which
would force the portfolio to reinvest in lower yielding securities. This is
known as call or prepayment risk

. An issuer of a security may default on its obligation to pay principal and/or
interest or the security's credit rating may be downgraded

. Slower than expected principal payments may extend a security's life. This
locks in a below-market interest rate, increases the security's duration and
reduces the value of the security. This is known as extension risk

. Greater sensitivity to rising interest rates because of the Portfolio's
longer average maturity and because the Portfolio invests a portion of its
assets in high yield securities

. Increased volatility in share price because the Portfolio invests a portion
of its assets in high yield securities and holds mortgage derivative securi-
ties with embedded leverage or unusual interest rate reset terms

Who may want to invest

The portfolio may be an appropriate investment if you:

. Are seeking current income

. Are willing to accept the risks of high yield and derivative investments

CO-SUBADVISORS

The Portfolio's assets are allo-
cated among four subadvisors as
follows: Standish - 50%, Na-
tional - 20%, APAM - 20%, Alli-
ance - 10%.

STANDISH AYER & WOOD, INC.

One Financial Center

Boston, MA 02111

PORTFOLIO MANAGER

Richard Doll

Mr. Doll has been a vice presi-
dent of the firm since 1984 and
a director since 1987.

NATIONAL ASSET MANAGEMENT CORP.

101 South Fifth Street

Louisville, Kentucky 40233

PORTFOLIO MANAGER

Michael C. Heyman

Mr. Heyman is a principal with
the firm and has 19 years of
investment experience.

ATLANTIC PORTFOLIO ANALYTICS AND
MANAGEMENT, INC.

201 East Pine Street, Suite 600

Orlando, Florida 32801

PORTFOLIO MANAGER

John L. Cassady III

Mr. Cassady is a portfolio man-
ager with the firm and has 11
years of investment experience.

ALLIANCE CAPITAL MANAGEMENT,
L.P.

1345 Avenue of the Americas

New York, NY 10105

PORTFOLIO MANAGERS

Nelson R. Jantzen

Sheryl A. Rothman

Mr. Jantzen is a senior vice
president and co-head of the
High Yield Group and has 25
years of investment experience.
Ms. Rothman is a vice president
and portfolio manager and has
13 years of investment
experience.

Multi-Sector Fixed Income Investments
<PAGE>

Performance

Because this Portfolio was added to the Consulting Group Capital Markets Funds
this year, the Portfolio does not yet have a sufficient operating history to
generate the performance information which other Smith Barney funds show in bar
and table form in this location of the prospectus.

Fee table

This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio and is based upon estimated expenses for the Portfo-
lio's current fiscal year.

<TABLE>
<S> <C>
Shareholder fees None
(fees paid directly from your
investment)
Maximum annual TRAK(R) fee* 1.50%
Annual Portfolio operating expenses
(expenses that are deducted from
Portfolio assets)
Management fee** 0.70%
Administration 0.20%
Other expenses 0.20%
-----
Total annual Portfolio operating
expenses 1.10%
</TABLE>

* Fee payable under the TRAK(R) Personalized Investment Advisory Service for
asset allocation services. See "Asset Allocation Programs."

** The management fee rate shown above reflects the maximum fee paid to the
manager and a single subadvisor. However, the projected effective annual
management fee rate for the Portfolio is expected to be 0.45% or less due to
the allocation of assets among multiple subadvisors. The Portfolio is oper-
ating under an expense cap of 0.80% for the current fiscal year. The ex-
pense cap will remain in effect until changed by the Board of Trustees.

Example

This example is intended to help you compare the cost of investing in the Port-
folio with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.

The example assumes:

. You invest $10,000 in the Portfolio for the time periods indicated;

. You reinvest all dividends and distributions;

. You redeem at the end of each period;

. Your investment has a 5% return each year; and

. The Portfolio's operating expenses remain the same.

Under these assumptions, your costs including the maximum annual TRAK(R) fee,
would be:

<TABLE>
<CAPTION>
After 1 After 3 After 5 After 10
year years years years
<S> <C> <C> <C>
$127 $675 $1,248 $1,419
---- ---- ------ ------
</TABLE>

BENCHMARK

The Portfolio's primary benchmark
is Lehman Brothers Aggregate Bond
Index. The Index is composed of
the Lehman Intermediate
Government/Corporate Bond Index
and the Lehman Mortgage-Backed
Securities Index and also
includes treasury issues, agency
issues, corporate bond issues and
mortgage-backed securities.
Unlike the Portfolio, the
benchmark is unmanaged and does
not include any expenses.

Multi-Sector Fixed Income Investments
<PAGE>

More on the Portfolio's Investments and Related Risks

The section entitled "Investments, Risks and Performance" describes the Portfo-
lio's investment objective and its principal investment strategies and risks.
This section provides some additional information about the Portfolio's invest-
ments and certain investment management techniques the Portfolio may use. More
information about the Portfolio's investments and portfolio management tech-
niques, some of which entail risk, is included in the Statement of Additional
Information (SAI). To find out how to obtain an SAI, please turn to the back
cover of this prospectus.

Percentage Limits

Some Portfolio policies in this
section are stated as a percent-
age of assets. These percentages
are applied at the time of pur-
chase of a security and subse-
quently may be exceeded because
of changes in the value of the
Portfolio's investments.

Fixed Income Investments. The Portfolio may invest in all types of fixed income
securities. Fixed income investments include bonds, notes (including structured
notes), mortgage-related and asset-backed securities, convertible securities,
eurodollar and yankee dollar instruments, preferred stocks and money market in-
struments. Fixed income securities may be issued by corporate and governmental
issuers and may have all types of interest rate payment and reset terms, in-
cluding fixed rate, adjustable rate, zero coupon, contingent, deferred, pay-
ment-in-kind and auction rate features.

An individual security's maturity is the date upon which the issuer must pay
back the face amount of the security. A security may have an "effective" matu-
rity which is shorter or longer than its stated maturity depending on the de-
gree of prepayment, or extension risk associated with that security. Duration
is the measure of an individual security's price sensitivity to changing inter-
est rates. The longer a security's duration, the more sensitive that security's
price will be to changes in interest rates.

Mortgage-related securities may be issued by private companies or by agencies
of the U.S. government and represent direct or indirect participations in, or
are collateralized by and payable from, mortgage loans secured by real proper-
ty. The Portfolio may invest up to 5% of its net assets in asset-backed secu-
rities, which represent participations in, or are secured by and payable from,
assets such as installment sales or loan contracts, leases, credit card receiv-
ables and other categories of receivables. The Portfolio's investments in as-
set-backed securities will be rated in the highest rating category at the time
of investment.

Certain debt instruments may pay principal only at maturity or may represent
only the right to receive payments of principal or payments of interest on un-
derlying pools of mortgages or government securities, but not both. The value
of these types of instruments may change more drastically than debt securities
that pay both principal and interest during periods of changing interest rates.
Principal only mortgage-backed securities are particularly subject to prepay-
ment risk. The Portfolio may obtain a below market yield or incur a loss on
such instruments during periods of declining interest rates. Interest only in-
struments are particularly subject to extension risk. For mortgage derivatives
and structured securities that have imbedded leverage features, small changes
in interest or prepayment rates may cause large and sudden price movements.
Mortgage derivatives can also become illiquid and hard to value in declining
markets.

Credit Quality

The Portfolio's rating criteria
are applied at the time of pur-
chase. If a security is subse-
quently downgraded, the
subadvisor may, but is not re-
quired to, sell the security. If
a security is rated differently
by two or more rating organiza-
tions, the subadvisor may use
the higher rating to determine
the security's rating category.

Securities are considered in-
vestment grade if they are:

. rated in one of the top four
long-term rating categories by
a nationally recognized sta-
tistical rating organization.

. unrated securities that the
subadvisor believes to be of
comparable quality.

Securities are considered below
investment grade if they are
rated below the top four long-
term ratings or are of equiva-
lent quality if unrated. Below
investment grade securities,
also known as "high yield secu-
rities," (commonly known as
"junk bonds") are subject to:

. the increased risk of an is-
suer's inability to meet prin-
cipal and interest obliga-
tions.

. greater price volatility be-
cause of a heightened sensi-
tivity to changing interest
rates.

. less liquidity.

Derivative contracts. The Portfolio may, but is not required to, use derivative
contracts for any of the following purposes:

. To hedge against adverse changes caused by changing interest rates, stock
market prices or currency exchange rates in the market value of securities
held by or to be bought for the Portfolio.

Multi-Sector Fixed Income Investments
<PAGE>

. As a substitute for purchasing or selling securities.

. To shorten or lengthen the effective maturity or duration of the Portfolio's
fixed income investments.

. To enhance the Portfolio's potential gain in non-hedging situations.

The Portfolio may use various types of derivative instruments, including op-
tions on securities and securities indices, futures and options on futures. A
derivative contract will obligate or entitle the Portfolio to deliver or re-
ceive an asset or a cash payment based on the change in value of one or more
designated securities, currencies or indices. Even a small investment in deriv-
ative contracts can have a big impact on the Portfolio's interest rate, stock
market and currency exposure. Therefore, using derivatives can disproportion-
ately increase Portfolio losses and reduce opportunities for gains when inter-
est rates, stock prices or currency rates are changing. The Portfolio may not
fully benefit from or may lose money on derivatives if changes in their value
do not correspond accurately to changes in the value of the Portfolio's hold-
ings. The other party to certain derivative contracts presents the same types
of credit risk as issuers of fixed income securities. Derivatives can also make
the Portfolio's assets less liquid and harder to value, especially in declining
markets.

Mortgage Dollar Rolls. The Portfolio may enter into mortgage dollar roll trans-
actions to earn additional income. In these transactions, the Portfolio sells a
U.S. agency mortgage-backed security and simultaneously agrees to repurchase at
a future date another U.S. agency mortgage-backed security with the same inter-
est rate and maturity date, but generally backed by a different pool of mort-
gages. The Portfolio loses the right to receive interest and principal payments
on the security it sold. However, the Portfolio benefits from the interest
earned on investing the proceeds of the sale and may receive a fee or a lower
repurchase price. The benefits from these transactions depend upon the
subadvisor's ability to forecast mortgage prepayment patterns on different
mortgage pools. The Portfolio may lose money if, during the period between the
time it agrees to the forward purchase of the mortgage securities and the set-
tlement date, these securities decline in value because of market conditions or
prepayments on the underlying mortgages.

High Yield Securities. The Portfolio can invest in high yield securities. These
are commonly known as "junk bonds" and involve a substantial risk of loss.
These securities are considered speculative with respect to the issuer's abil-
ity to pay interest and principal and are susceptible to default or decline in
market value because of adverse economic and business developments. The market
values for high yield securities tend to be very volatile, and these securities
are less liquid than investment grade debt securities. The Portfolio may expe-
rience increased price sensitivity to changing interest rates and greater risk
of loss because of default or declining credit quality. In addition, adverse
company specific events are more likely to render the issuer unable to make in-
terest and/or principal payments. A negative perception of the high yield mar-
ket may develop, depressing the price and liquidity of high yield securities.
This negative perception could last for a significant period of time.

Defensive investing. The Portfolio may depart from its principal investment
strategies in response to adverse market, economic or political conditions by
taking temporary defensive positions in all types of money market and short
term debt securities. The Portfolio's investments in these assets are managed
by SSBC.

Impact of high portfolio turnover. The Portfolio may engage in active and fre-
quent trading to achieve its principal investment strategies. This may lead to
the realization and distribution to shareholders of higher capital gains, which
would increase their tax liability. Frequent trading also increases transaction
costs, which could detract from the Portfolio's performance.

Investment Policies. The portfolio's investment policies generally may be
changed by the Board of Trustees without shareholder approval.

Multi-Sector Fixed Income Investments
<PAGE>

The Manager

The manager. The Consulting Group, a division of SSBC, serves as the manager
for the Portfolio. SSBC is a wholly-owned subsidiary of Salomon Smith Barney
Holdings Inc., which in turn is a wholly-owned subsidiary of Citigroup Inc.
Citigroup businesses produce a broad range of financial services--asset manage-
ment, banking and consumer finance, credit and charge cards, insurance, invest-
ments, investment banking and trading--and use diverse channels to make them
available to consumer and corporate customers around the world. As manager, the
Consulting Group selects and oversees professional money managers who are re-
sponsible for investing the assets of the Portfolio. The Consulting Group was
established to match the investment needs of institutional investors and sub-
stantial individual investors with appropriate and well-qualified investment
advisers. Since 1973, the Consulting Group has grown to become one of the na-
tion's foremost organizations providing portfolio evaluation, asset allocation,
market analysis and investment adviser selection services.

The Portfolio is part of a series of portfolios which comprise the Consulting
Group Capital Market Funds (the "Trust"). The Trust is a series company that
consists of the Portfolio and the following additional portfolios which are of-
fered in a separate prospectus, a copy of which can be obtained from any Salo-
mon Smith Barney Financial Consultant:

. Government Money Investments

. Intermediate Fixed Income Investments

. Long-Term Bond Investments

. Municipal Bond Investments

. Mortgage Backed Investments

. High Yield Investments

. Balanced Investments

. Large Capitalization Value Equity Investments

. Large Capitalization Growth Investments

. Small Capitalization Value Equity Investments

. Small Capitalization Growth Investments

. International Equity Investments

. International Fixed Income Investments

. Emerging Markets Equity Investments

. Multi-Strategy Market Neutral Investments

The Evaluation Process

The Consulting Group screens
more than 3,000 registered in-
vestment advisory firms, tracks
the performance of more than 700
firms on its comprehensive data-
base and evaluates the strength
and performance of advisory
firms in Consulting Group pro-
grams each year. Throughout the
evaluation, the Consulting Group
focuses on a number of key is-
sues:

. level of expertise

. relative performance and
consistency of performance

. strict adherence to investment
discipline or philosophy

. personnel, facility and finan-
cial strength

. quality of service and commu-
nication.

The subadvisors. The subadvisors are responsible for the day-to-day investment
operations of the Portfolio in accordance with the Portfolio investment objec-
tives and policies. The name and address of each subadvisor, and the name and
background of each portfolio manager, is included in the section entitled "In-
vestments, Risks and Performance".

The subadvisor selection process. Subject to the review and approval of the
Portfolio's Trustees, the Consulting Group is responsible for selecting, super-
vising and evaluating subadvisors who manage the Portfolio's assets. The Con-
sulting Group may adjust the allocation of the Portfolio's assets among the
subadvisors by up to 10%. Any adjustment affecting more than 10% of the Portfo-
lio's assets can only be made by the Board of Trustees. The Consulting Group
employs a rigorous evaluation process to select those subadvisors that have
distinguished themselves through consistent and superior performance. The Con-
sulting Group is also responsible for communicating performance expectations
and evaluations to the subadvisors and ultimately recommending to the Board of
Trustees whether a subadvisor's contract should be renewed. The Consulting
Group provides written reports to the Trustees regarding the results of its
evaluation and monitoring functions.

The Portfolio relies upon an exemptive order from the Securities and Exchange
Commission which permits the manager to select new subadvisors or replace ex-
isting subadvisors without first obtaining shareholder approval for the change.
The Trustees, including a majority of the "non-interested" Trustees, must ap-
prove each new

Multi-Sector Fixed Income Investments
<PAGE>

subadvisory contract. This allows the manager to act more quickly to change
subadvisors when it determines that a change is beneficial to shareholders by
avoiding the delay of calling and holding shareholder meetings to approve each
change. In accordance with the exemptive order, the Portfolio will provide in-
vestors with information about each new subadvisor and its subadvisory contract
within 90 days of the engagement of a new subadvisor.

Management Fees. The Consulting Group receives fees from the Portfolio for its
services at an annual rate of 0.70% of its average daily net assets. In turn,
the Consulting Group pays the subadvisors a portion of this fee for their serv-
ices. In addition, the Portfolio pays SSBC a fee at an annual rate of 0.20% of
the Portfolio's average daily net assets for administration services.

Possible Conflict of Interest. The advisory fee paid by each portfolio in the
Trust to the manager and the portion of that advisory fee paid by the manager
to each subadvisor varies depending upon the portfolio of the Trust selected.
For this reason, the manager could retain a larger portion of the advisory fee
by recommending certain portfolios in the Trust over other portfolios for asset
allocation. You should consider this possible conflict of interest when evalu-
ating the manager's asset allocation recommendation. The manager intends to
comply with standards of fiduciary duty that require it to act solely in the
best interest of a participant when making investment recommendations.

Year 2000 issue

Information technology experts are concerned about computer systems' ability to
process date-related information on and after January 1, 2000. This situation,
commonly known as the "Year 2000" issue, could have an adverse impact on the
Portfolio. The cost of addressing the Year 2000 issue, if substantial, could
adversely effect companies and governments that issue securities held by the
Portfolio. The manager and Salomon Smith Barney are addressing the Year 2000
issue for their systems. The Portfolio has been informed by other service prov-
iders that they are taking similar measures. Although the Portfolio does not
expect the Year 2000 issue to adversely affect it, the Portfolio cannot guaran-
tee that the efforts of the Portfolio, which are limited to requesting and re-
ceiving reports from service providers, or the efforts of service providers to
correct the problem, will be successful.

Multi-Sector Fixed Income Investments
<PAGE>

Asset Allocation Programs

Shares of the Trust's Portfolios are available to participants in advisory pro-
grams sponsored by Salomon Smith Barney Inc., including the TRAK(R) Personal-
ized Investment Advisory Service, or other qualified investment advisors ap-
proved by the Consulting Group. The advisory services provide investors with
asset allocation recommendations, which are implemented through the Portfolios.

Advisory services generally include:

. evaluating the investor's investment objectives and time horizon

. analyzing the investor's risk tolerance

. recommending an allocation of assets among the portfolios in the Trust

. providing monitoring reports containing an analysis and evaluation of an in-
vestor's account and recommending any changes

While an advisory service makes a recommendation, the ultimate investment deci-
sion is normally up to the investor and not the provider of the advisory serv-
ice.

Under an advisory service, an investor typically pays an advisory fee that may
vary based on a number of factors. The maximum fee for assets invested in the
Trust under a Salomon Smith Barney advisory service is 1.50% of average quar-
ter-end net assets. This fee may be reduced in certain circumstances. The fee
under a Salmon Smith Barney advisory program may be paid either by redemption
of shares of the Trust or by separate payment.

Multi-Sector Fixed Income Investments
<PAGE>

Investment and Account Information
Account Transactions

Purchase of Shares. You may purchase shares of the Portfolio if you are a par-
ticipant in an advisory program sponsored by Salomon Smith Barney, including
TRAK(R), or by qualified investment advisers not affiliated with Salomon Smith
Barney. Purchases of shares of the Portfolio must be made through a brokerage
account maintained with Salomon Smith Barney or through a broker that clears
securities transactions through Salomon Smith Barney (an introducing broker).
You may establish a brokerage account with Salomon Smith Barney free of charge
in order to purchase shares of the Portfolio.

. The minimum initial aggregate investment in the TRAK program is $10,000. The
minimum investment in a Portfolio is $100.

. There is no minimum on additional investments.

. The minimum initial aggregate investment in the TRAK program for employees of
Salomon Smith Barney and members of their immediate families, and retirement
accounts or plans for those persons, is $5,000.

. The Portfolio and the TRAK program may vary or waive the investment minimums
at any time.

. You may establish a Systematic Withdrawal/Investment Schedule. For more in-
formation, contact your Investment Professional or consult the SAI.

Shares of the Portfolio are sold at net asset value per share without imposi-
tion of a sales charge but will be subject to any applicable advisory program
fee. All orders to purchase accepted by Salomon Smith Barney or the introducing
broker before 4:00 p.m., Eastern time, will receive that day's share price. Or-
ders accepted after 4:00 p.m. will receive the next day's share price. All pur-
chase orders must be in good order to be accepted. This means you have provided
the following information:

. Name of the Portfolio

. Account Number

. Dollar amount or number of shares to be purchased

. Signatures of each owner exactly as the account is registered

The Portfolio reserves the right to reject purchase orders or to stop offering
its shares without notice. No order will be accepted unless Salomon Smith Bar-
ney has received and accepted an advisory agreement signed by the investor par-
ticipating in the TRAK(R) program or other advisory program sponsored by Salo-
mon Smith Barney. With respect to investors participating in advisory programs
sponsored by entities other than Salomon Smith Barney, Salomon Smith Barney
must have received and accepted the appropriate documents before the order will
be accepted. Payment for shares must be received by Salomon Smith Barney or the
introducing broker within three business days after the order is placed in good
order.

Redemption of Shares. You may sell shares of the Portfolio at net asset value
on any day the New York Stock Exchange is open by contacting your broker. All
redemption requests accepted by Salomon Smith Barney or an introducing broker
before 4:00 p.m. Eastern time on any day will be executed at that day's share
price. Orders accepted after 4:00 p.m. will be executed at the next day's
price. All redemption orders must be in good form, which may require a signa-
ture guarantee (available from most banks, dealers, brokers, credit unions and
federal savings and loan associations, but not from a notary public) to assure
the safety of your account. If you discontinue your Salomon Smith Barney advi-
sory service, you must redeem your shares in the Portfolio.

The Portfolio has the right to suspend redemptions of shares and to postpone
the transmission of redemption proceeds to a shareholder's account at Salomon
Smith Barney or at an introducing broker for up to seven days, as permitted by
law. Redemption proceeds held in an investor's brokerage account generally will
not earn any income and Salomon Smith Barney or the introducing broker may ben-
efit from the use of temporarily uninvested funds. A shareholder who pays for
shares of the Portfolio by personal check will be credited with the proceeds of
a redemption of those shares after the purchaser's check has cleared, which may
take up to 15 days.

Exchange of Shares. An investor that participates in an advisory program may
exchange shares in the Portfolio for shares in any other portfolio in the Trust
at net asset value without payment of an exchange fee. Be sure to consider the
investment objectives and policies of any Portfolio into which you make an ex-
change. An exchange is a taxable transaction except for exchanges within a re-
tirement account.

The Consulting Group may limit additional exchanges and/or purchases by a
shareholder if it determines that the shareholder is pursuing a pattern of fre-
quent exchanges. Excessive exchange transactions can adversely affect the Port-
folio's performance, hurting the Portfolio's other shareholders. If the Con-
sulting Group discovers a pattern of frequent exchanges, it will provide notice
in writing or by telephone to the shareholder at least 15 days before sus-
pending his or her exchange privilege. During the 15-day period the shareholder
will be re -

Multi-Sector Fixed Income Investments
<PAGE>

Investment and Account Information, continued

quired either to redeem his or her shares in the Portfolio or establish an al-
location which the shareholder expects to maintain for a significant period of
time.

Accounts with Low Balances. If your account falls below $7,500 as a result of
redemptions (and not because of performance or payment of the Salomon Smith
Barney Advisory Service fees), Salomon Smith Barney or the introducing broker
may ask you to increase the size of your account to $7,500 within thirty days.
If you do not increase the account to $7,500, Salomon Smith Barney may redeem
the shares in your account at net asset value and remit the proceeds to you.
The proceeds will be deposited in your brokerage account unless you instruct
otherwise.

Valuation of shares

The Portfolio offers its shares at their net asset value per share. The Portfo-
lio calculates net asset value once daily as of the close of regular trading on
the New York Stock Exchange (generally at 4:00 p.m., New York time) on each day
the exchange is open. If the exchange closes early, the Portfolio accelerates
calculation of net asset value and transaction deadlines to the actual closing
time.

A Portfolio generally values its fund securities based on market prices or quo-
tations. The Portfolio's currency conversions, if any, are done when the London
stock exchange closes. When market prices are not available, or when the Con-
sulting Group believes they are unreliable or that the value of a security has
been materially affected by events occurring after the securities or currency
exchanges close, the Portfolio may price those securities at fair value. Fair
value is determined in accordance with procedures approved by the Portfolio's
Board of Trustees. A mutual fund that uses fair value to price securities may
value those securities higher or lower than another fund using market quota-
tions to price the same securities.

International markets may be open, and trading may take place, on days when
U.S. markets are closed. For this reason, the values of foreign securities
owned by the Portfolio could change on days when shares of the Portfolio cannot
be bought or sold.

Dividends and distributions

The Portfolio intends to distribute all or substantially all of its net invest-
ment income and realized capital gains, if any, for each taxable year. The
Portfolio declares and pays dividends, if any, from net investment income
monthly. The Portfolio declares and distributes realized net capital gains, if
any, annually. All dividends and capital gains are reinvested in shares of the
Portfolio unless the shareholder elects to receive them in cash.

The Portfolio expects distributions to be primarily from net investment income.

Taxes
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Transactions Federal Tax Status
- ------------------------------------------------------------------------------
<S> <C>
Sales or exchange of shares Usually capital gain
or loss; long-term
only if shares owned
more than one year
- ------------------------------------------------------------------------------
Distributions of long term Long-term capital
capital gain gain
- ------------------------------------------------------------------------------
Distributions of short term Ordinary income
capital gain
- ------------------------------------------------------------------------------
Dividends from net Ordinary income
investment income
- ------------------------------------------------------------------------------
Any of the above received by Not a taxable event
a retirement account
- ------------------------------------------------------------------------------
</TABLE>

Long-term capital gain distributions are taxable to you as long-term capital
gain regardless of how long you have owned your shares. You may want to avoid
buying shares when the Portfolio is about to declare a capital gain distribu-
tion or a taxable dividend, because it will be taxable to you even though it
may actually be a return of a portion of your investment.

After the end of each year, you will receive a Form 1099 indicating your divi-
dends and distributions for the prior year, which are taxable as described
above even if reinvested, and your redemptions during that year. If you do not
provide the Portfolio with your correct taxpayer identification number and any
required certifications, you may be subject to backup withholding of 31% of the
Portfolio's distributions, dividends and redemption proceeds. Because each
shareholder's circumstances are different and special tax rules may apply, you
should consult your tax adviser about your investment in the Portfolio.

As noted above, investors, out of their own assets, will pay an advisory serv-
ice fee. For most investors who are individuals, this fee will be treated as a
"miscellaneous itemized deduction" for federal income tax purposes. Under cur-
rent federal income tax law, an individual's miscellaneous itemized deductions
for any taxable year will be allowed as a deduction only to the extent the ag-
gregate of these deductions exceeds 2% of adjusted gross income. Such deduc-
tions are also subject to the general limitation on itemized deductions for in-
dividuals having, in 1999, adjusted gross income in excess of $126,600 ($63,300
for married individuals filing separately).

Multi-Sector Fixed Income Investments
<PAGE>

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<PAGE>

APPENDIX A

Investment Indices

Following are definitions of indices that are utilized in the Client's Recom-
mendation and Review.

Lehman Brothers Government/Corporate Bond Index
Composed of publicly issued, fixed rate, non-convertible domestic debt in three
major classifications: industrial, utility, financial as well as the domestic
debt of the U.S. Government or any agency thereof. All issues have at least one
year to maturity, or an outstanding par value of at least $100 million for U.S.
Government issues and $50 million for corporate issues. All corporate issues
have a minimum rating of Baa by Moody's or BBB by Standard & Poor's.

Lehman Brothers Aggregate Bond Index
Composed of the Lehman Intermediate Government/ Corporate Bond Index and the
Mortgage-Backed Securities Index and also includes treasury issues, agency
issues, corporate bond issues and mortgage-backed securities.

Lehman Brothers Long Term Government/Corporate Bond Index
Includes all bonds covered by the Lehman Brothers Government/Corporate Bond
Index, with maturities of 10 years or longer. Total return includes income and
appreciation/depreciation as a percentage of original investment.

Lehman Brothers Intermediate Government/Corporate Bond Index
A subset of the Lehman Brothers Government/Corporate Bond Index covering issues
with maturities up to ten years.

Lehman Brothers Mortgage Backed Securities Bond Index
Contains all fixed securities issued and backed by mortgage pools of GNMA's,
FHLMC's, FNMA's, Graduated Payment Mortgage (GPM's), but not Graduated Equity
Mortgages (GEM).

Lehman Brothers Municipal Bond Index
A composite measure of the total return performance of the municipal bond
market, which includes more than two million different bond issues. For
simplicity, the market is divided into seven major sectors, with the
performance of each sector weighted according to issue volume (adjusted
annually).

Lipper Corporate Debt Funds A Rated Average
An average of the reinvested performance of funds that invest at least 65% of
their assets in corporate debt issues rated "A" or better or government issues.

Lipper Corporate Debt Funds A Rated Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.

Lipper General Municipal Funds Average
An average of the reinvested performance of funds that invest at least 65% of
their assets in municipal debt issues in the top four credit ratings.

Lipper General Municipal Funds Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.

Lipper General World Funds Average
An average of the reinvested performance of the following twelve Lipper
investment objectives: Gold Oriented, Global, Global Small Company,
International, International Small Company, European Region, Pacific Ex Japan,
Pacific Region, Emerging Markets, Japanese, Latin American and Ca nadian Funds.

Lipper Growth Funds Average
An average of the reinvested performance of funds that normally invest in
companies whose long-term earnings are expected to grow significantly faster
than the earnings of the stocks represented in the major unmanaged stock
indices.

Lipper Growth Funds Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.

Lipper International Funds Average
An average of the reinvested performance of funds that invest its assets in
securities whose primary trading markets are outside of the United States.

Lipper International Funds Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.

Lipper Small Company Growth Funds Average
An average of the reinvested performance of funds that by their prospectus or
portfolio practice, limit investments to companies on the basis of the size of
the company.

Lipper Small Company Growth Funds Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.

Lipper U.S. Government Money Market Funds Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.

Lipper U.S. Mortgage Funds Average
An average of the reinvested performance of funds that invest at least 65% of
their assets in mortgages/securities issued or guaranteed as to principal and
interest by the U.S. Government and certain federal agencies.

Morgan Stanley EAFE (Capitalization Weighted)
A composite portfolio of equity (stock market) total returns for the countries
of Europe, Australia, New Zealand and the Far East. The return for each country
is weighted on the basis of its market capitalization.

A-1
<PAGE>

APPENDIX A

Investment Indices--(Continued)

Morgan Stanley Emerging Equity Markets Free Gross Dividend Index
A composite portfolio consisting of equity total returns for countries with low
to middle per capita income, as determined by the World Bank. Some of these
countries include: Argentina, Greece, India, Malaysia and Turkey. The return
for each country is weighted on the basis of its total market capitalization.

90-Day Treasury Bill Index
Unweighted average of weekly auction offering rates of 90-Day Treasury Bills.
Treasury Bills are backed by the full faith and credit of the U.S. Government.

Russell 1000 Index
The 1,000 largest U.S. companies by market capitalization, the smallest of
which has about $457 million in market capitalization. The average market
capitalization for a company in this index is $3.42 billion.

Russell 1000 Value Index
Contains those Russell 1000 securities with less-than-average growth
orientation. Companies in this index generally have low price-to-book and
earnings ratios and higher dividend yields than stocks in the Russell 1000
Growth Index.

Russell 1000 Growth Index
Contains those Russell 1000 securities with greater-than-average growth
orientation. Companies in this index tend to exhibit high price-to-book and
earnings ratios and lower dividend yields than stocks in the Russell 1000 Value
Index.

Russell 2000 Index
Composed of the 2,000 smallest U.S. securities as determined by total market
capitalization, representing about 7.1% of the U.S. equity market
capitalization. The average market capitalization for a company in this index
is $155 million, with the largest being $457 million.

Russell 2000 Value Index
Contains those Russell 2000 securities with less-than-average growth
orientation. Companies in this index generally have low price-to-book and
earnings ratios and higher dividend yields than stocks in the Russell 2000
Growth Index.

Russell 2000 Growth Index
Contains those Russell 2000 securities with greater-than-average growth
orientation. Companies in this index tend to exhibit high price-to-book and
earnings ratios and lower dividend yields than stocks in the Russell 2000 Value
Index.

Standard & Poor's 500 Index
Tracks the total return of 500 of the largest stocks (400 industrial, 40
utility, 20 transportation and 40 financial companies) in the United States,
which represent about 78% of the New York Stock Exchange's total market
capitalization. The return of each stock is weighted on the basis of the
stock's capitalization.

Salomon Brothers Non-U.S. Government Bond Index
A market capitalization-weighted index consisting of government bond markets of
Austria, France, Spain, Australia, Germany, Sweden, Belgium, Italy, United
Kingdom, Canada, Japan, Denmark and the Netherlands.

Wilshire Large Company Growth Equity Index
Focuses on the top 750 companies of the Wilshire 5000 in terms of market
capitalization. The smallest company's capitalization is $675 million. The
index excludes companies meeting one or more of the following criteria: less
than 5 years of operating history, high dividend payout companies, low price-
to-book companies or low return on equity.

Wilshire Large Company Value Equity Index
Focuses on the top 750 companies of the Wilshire 5000 in terms of market
capitalization. The smallest company's capitalization is $675 million. The
index excludes companies that do not rank favorably on a relative basis due to
their high P/E and price-to-book ratios, or low yield.

Wilshire Small Company Growth Equity Index
Focuses on companies that rank between 751-1,750 of the Wilshire 5000 in terms
of market capitalization. The smallest company's capitalization is $58 million.
The index excludes companies meeting one or more of the following criteria:
less than two years operating history, high yield, little or no earnings growth
or low beta.

Wilshire Small Company Value Equity Index
Focuses on companies that rank between 751-1,750 of the Wilshire 5000 in terms
of market capitalization. The smallest company's capitalization is $58 million.
The index excludes companies that do not rank favorably on a relative basis due
to their high price-to-earnings and price-to-book ratios, or low yield.

A-2
<PAGE>

APPENDIX B

The following are copies of the proposed and final exemptions from the Depart-
ment of Labor from certain provisions of the Employee Retirement Income Secu-
rity Act of 1974 relating to the purchase of shares and participation in TRAK
by certain retirement plans.

- --------------------------------------------------------------------------------
[Application Nos. D-9337 and D-9415]

Smith Barney Shearson (SBS), Located in New York, NY

NEW AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemption to modify and replace prohibited
transaction exemption (PTE) 92-77 involving Shearson Lehman Brothers, Inc.
(Shearson Lehman).
- --------------------------------------------------------------------------------
SUMMARY: This document contains a notice of pendency before the Department of
Labor (the Department) of a proposed individual exemption which, if granted,
would replace PTE 92-77 (55 FR 45833, October 5, 1992). PTE 92-77 permits the
purchase or redemption of shares by an employee benefit plan, an individual
retirement account (the IRA) or a retirement plan for a self-employed
individual (the Keogh Plan; collectively the Plans) in the Trust for TRAK
Investments (the Trust) established by Shearson Lehman, in connection with such
loans' participation in the TRAK Personalized Investment Advisory Service (the
TRAK Program). In addition, PTE 92-77 permits the provision, by the Consulting
Group Division of Shearson Lehman (the Consulting Group), of investment
advisory services to an independent fiduciary of a participating Plan (the
Independent Plan Fiduciary) which may result in such fiduciary's selection of a
portfolio (the Portfolio) in the TRAK Program for the investment of Plan
assets. These transactions are described in a notice of pendency that was
published in the Federal Register on April 3, 1992 at 57 FR 11514. PTE 92-77 is
effective as of April 3, 1992.
If granted, the proposed exemption would replace PTE 92-77, which as discussed
below, expired by operation of the law. The new proposed exemption would permit
the replacement of Shearson Lehman with a newly-merged entity known as "Smith
Barney Shearson, Inc." It would also permit the adoption of a daily-traded
collective investment fund (the GIC Fund) for Plans providing for participant
directed investments (the Section 404(c) Plans). The proposed exemption would
provide conditional relief that is identical to that provided by PTE 92-77. In
addition, the proposed exemption would affect participants and beneficiaries
of, and fiduciaries with respect to, Plans participating in the TRAK Program.

DATES: Written comments and requests for a public hearing should be received by
the Department on or before the expiration of 60 days from the publication of
this proposed exemption in the Federal Register. If granted, the proposed
exemption will be effective July 31, 1993 for transactions that are covered by
PTE 92-77. With respect to transactions involving the GIC Fund, the proposed
exemption will be effective as of the date the grant notice is published in the
Federal Register.

ADDRESSES: All written comments and requests for a public hearing (preferably,
three copies) should be sent to the Office of Exemption Determinations, Pension
and Welfare Benefits Administration, Room N-5849, U.S. Department of Labor, 200
Constitution Avenue, NW., Washington, DC 20210. Attention: Application Nos. D-
9337 and D-9415. The applications pertaining to the proposed exemption and the
comments received will be available for public inspection in the Public
Documents Room of the Pension and Welfare Benefits Administration. U.S.
Department of Labor, Room N-3307, 200 Constitution Avenue, NW., Washington, DC
20210.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady, Office of Exemption
Determinations, Pension and Welfare Benefits Administration, U.S. Department of
Labor, telephone (202) 219-8881. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: Notice is hereby given of the pendency before the
Department of a proposed exemption that would replace PTE 92-77. PTE 92-77
provides an exemption from certain prohibited transaction restrictions of
section 406 of the Employee Retirement Income Security Act of 1974 (the Act)
and from the sanctions resulting from the application of section 4975 of the
Internal Revenue Code of 1986 (the Code), as amended, by reason of section
4975(c)(1) of the Code. The proposed exemption was requested in an application
filed by SBS pursuant to section 408(a) of the Act and section 4975(c)(2) of
the Code, and in accordance with the procedures (the Procedures) set forth in
29 CFR Part 2570, Subpart 3 (55 FR 32836, August 10, 1990). Effective December
31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR 47713,
October 17, 1978) transferred the authority of the Secretary of the Treasury to
issue exemptions of the type requested to the Secretary of Labor. Accordingly,
this proposed replacement exemption is being issued solely by the Department.

As stated briefly above, PTE 92-77 allows Shearson Lehman to make the TRAK
Program available to Plans that acquire shares in the Trust subject to certain
conditions. Specifically, PTE 92-77 provides exemptive relief from section
406(a) of the Act and the sanctions resulting from the application of section
4975 of the Code, by reason of section 4975(c)(1) (A) through (D) of the Code,
with respect to the purchase or redemption of shares in the Trust by Plans
investing therein. In addition, PTE 92-77 provides exemptive relief from the
restrictions of section 408(b)(1) and (b)(2) of the Act and the sanctions
resulting from the application of section 4975 of the Code, by reason of
section 4975(c)(1)(E) of the Code, with respect to the provision, by the
Consulting Group of Shearson Lehman, of investment advisory services to an
Independent Plan Fiduciary of a Plan participating in the TRAK Program which
may result in such fiduciary's selection of a Portfolio in the TRAK Program for
the investment of Plan assets.

Subsequent to the granting of PTE 92-77, Shearson Lehman informed the
Department that it had signed an asset purchase agreement with Primerica
Corporation (Primerica) and Smith Barney Harris Upham & Company, Inc. (Smith
Barney), an indirect wholly owned subsidiary. The terms of the agreement
provided for the sale of substantially all of the assets of Shearson Lehman and
its Asset Management Divisions (collectively, the Shearson Divisions) to Smith
Barney./1/ The transaction was completed on July 31, 1993. As a result of the
transaction, most of the assets and business of the Shearson Divisions were
transferred to Smith Barney which, upon merger with Shearson Lehman, was
renamed "Smith Barney Shearson." (Smith Barney Shearson is denoted herein as
SBS.) Shearson Lehman received cash and an
- -------
/1/ Shearson Lehman's other primary division, Lehman Brothers, which is
responsible for securities underwriting, financial advisory, investment and
merchant banking services and commodities trading as a principal and agent has
been retained by Shearson Lehman it has been renamed "Lehman Brothers Inc."
B-1
<PAGE>

interest-bearing note from SBS. As further consideration for the asset sale,
SBS agreed to pay future contingent amounts based upon the combined performance
of SBS and certain other Shearson Divisions acquired from Shearson Lehman.
Shearson Lehman also assigned to the American Express Company (American
Express) the right to receive 2.5 million shares of certain convertible
preferred stock issued by Primerica and a warrant. As consideration for the
assignment, American Express agreed to pay Shearson Lehman for the stock and
the warrant based on their value as of March 12, 1993, the date of the Asset
Purchase Agreement. At present, SBS offers the TRAK Program to investors
through one or more of its subsidiaries or divisions.

Since PTE 92-77 was granted, SBS informed the Department that it wished to
modify the exemption in order to improve the TRAK Program and make it more
responsive to the needs of investors. Specifically, SBS proposes to add to the
Portfolios currently available under the TRAK Program, the GIC Fund, which is
designed to invest primarily in guaranteed investment contracts (the GIC's),
synthetic GIC products and/or units of other GIC collective funds. The GIC Fund
will not differ in any material respects from the Government Money Investments
Portfolio which generally permits daily redemptions of its shares. In addition,
the GIC Fund will operate in a manner that is consistent with the requirements
of PTE 92-77. SBS believes it is important to offer the GIC Fund to Section
404(c) Plans because these Plans may prefer to offer participants this type of
investment option instead of the Government Money Investments Portfolio
presently offered to such Plans under the TRAK Program. Therefore, SBS requests
exemptive relief in order that the GIC Fund may be added to the Portfolios that
are available under the Trust.

The proposed GIC Fund will be a collective trust fund established and
maintained by Smith Barney Shearson Trust Company (SBS Trust), a wholly owned
subsidiary of Primerica. The GIC Fund will invest primarily in a portfolio of
GICs with varying maturities issued by highly-rated insurance companies, and/or
units of other collective funds invested in GICs. The GIC Fund may also invest
in asset-backed investment products designed to offer risk and return
characteristics similar to those of GICs (i.e., synthetic GIC products). In
addition, the GIC Fund may hold short-term, low risk securities where the
investment of all fund assets in GICs and/or units of other GIC collective
funds is not feasible.

SBS Trust will serve as the trustee of the GIC Fund. SBS Trust will employ a
sub-adviser (the Sub-Adviser) which is independent of SBS and its affiliates to
make recommendations on purchases of GICs and/or units of other GIC collective
funds. Currently, SBS Trust employs Morley Capital Management (Morley Capital)
of Lake Oswego, Oregon as the Sub-Adviser of the GIC Fund. SBS Trust will also
employ Boston Company Investors Services Group (ISG), a business group of The
Boston Company to provide custody and valuation services and The Shareholder
Services Group, Inc. (TSSG), an entity which is indirectly owned by American
Express, as transfer agent. Both ISG and TSSG are not affiliated with SBS.
SBS represents that the GIC Fund will not pay a management or other similar
fee to it or SBS Trust. (SBS Trust's fees for general trust services provided
to a Section 404(c) Plan is included in such plan's investment advisory or
"outside" fee.) A management fee may be paid to Morley Capital or any other
Sub-Adviser which is independent of SBS and its affiliates. The GIC Fund will
pay ISG, as custodian and provider of fund valuation services, a fee for such
services, and TSSG, as transfer agent, a fee of $8.50 to $9.50 per Section
404(c) Plan, plus out-of-pocket expenses. With respect to the fees paid to SBS
and its affiliates, the GIC Fund will not differ materially from the Government
Money Investments Portfolio in that it will not pay a management or other
similar fee to SBS or SBS Trust.
SBS will describe the GIC Fund, in the prospectus (the Prospectus) and
promotional materials it furnishes to Section 404(c) Plan participants who are
interested in investing in the GIC Fund. Such disclosures will reflect, in all
material respects, the information discussed above.
Because of the foregoing material changes to the factual representations
supporting PTE 92-77, the Department has determined that the prior exemption
was no longer effective as of July 31, 1993, the date Shearson Lehman sold the
assets described above to SBS. Thus, the Department is of the view that PTE 92-
77 would be unavailable for use by SBS and its subsidiaries with respect to the
subject transactions.
Accordingly, the Department has decided to publish a new exemption which, if
granted, would replace PTE 92-77. Under the replacement exemption, all
references to Shearson Lehman would be replaced with references to SBS. In
addition, the replacement exemption would incorporate the new GIC Fund, SBS
Trust, ISG and TSSG. Further, the replacement exemption would have an effective
date of July 31, 1993 for transactions described in PTE 92-77. With respect to
transactions involving the GIC Fund, the replacement exemption would become
effective as of the date of the grant of the notices of pendency.

Notice to Interested Persons
Notice of the proposed exemption will be mailed by first class mail to each
Plan which invests in the TRAK Program. The notice will contain a copy of the
notice of proposed exemption as published in the Federal Register and an
explanation of the rights of interested persons to comment on and/or request
such a hearing with respect thereto. Such notice will be sent to the above-
named parties within 30 days of the publication of the proposed exemption in
the Federal Register. Written comments and hearing request are due within 60
days of the publication of the proposed exemption in the Federal Register.

General Information
The attention of interested persons is directed to the following:
(1) This fact that a transaction is the subject of an exemption under section
408(a) of the Act and section 4973(c)(2) of the Code does not relieve a
fiduciary or other party in interest or disqualified person from certain other
provisions of the Act and the Code, including any prohibited transaction
provisions to which the exemption does not apply and the general fiduciary
responsibility provisions of section 404 of the Act, which require, among other
things, a fiduciary to discharge his or her duties respecting the plan solely
in the interest of the participants and beneficiaries of the plan and in a
prudent fashion in accordance with section 404(a)(1)(B) of the Act; nor does it
affect the requirements of section 401(a) of the Code that the Plan operate for
the exclusive benefit of the employees of the employer maintaining the plan and
their beneficiaries;
(2) Before an exemption can be granted under section 408(a) of the Act and
section 4975(c)(2) of the Code, the Department must find that the exemption is
administratively feasible, in the interest of the plan and of its participants
and beneficiaries and protective of the rights of participants and
beneficiaries of the plan; and
(3) The proposed exemption, if granted, will be supplemental to, and not in
derogation of, any other provisions of the
B-2
<PAGE>

Act and the Code, including statutory or administrative exemptions.
Furthermore, the fact that a transaction is subject to an administrative or
statutory exemption is not dispositive of whether the transaction is in fact a
prohibited transaction.
(4) In addition to transactions involving the GIC Fund, the proposed
exemption, if granted, will be applicable to the transactions previously
described in PTE 92-77 only if the conditions specified therein are met.

Written Comments and Hearing Requests
All interested persons are invited to submit written comments or requests for
a hearing on the proposed replacement exemption to the address above, within
the time period set forth above. All comments will be made a part of the
record. Comments and requests for a hearing should state the reasons for the
writer's interest in the proposed exemption. Comments received will be
available for public inspection with the referenced applications at the address
set forth above.

Proposed Exemption
Under the authority of section 408(a) of the Act and section 4975(c)(2) of the
Code and in accordance with the Procedures cited above, the Department proposes
to replace PTE 92-77 as follows:

Section 1. Covered Transactions
(a) The restrictions of section 406(a) of the Act and the sanctions resulting
from the application of section 4975 of the Code, by reason of section
4975(c)(1)(A) through (D) of the Code, shall not apply to the purchase or
redemption of shares by Plans in the SBS-established Trust in connection with
such Plans' participation in the TRAK Personalized Investment Advisory Service.

(b) The restrictions of action 406(b) of the Act and the sanctions resulting
from the application of section 4975 of the Code by reason of section
4975(c)(1)(E) and (F) of the Code, shall not apply to the provision, by the
Consulting Group, of investment advisory services to an Independent Plan
Fiduciary of a participating Plan which may result in such fiduciary's
selection of a Portfolio in the TRAK Program for the investment of Plan assets.
The proposed exemption is subject to the following conditions that are set
forth in Section II.

(b) The total fees paid to the Consulting Group and its affiliates will
constitute no more than reasonable compensation.
(c) No Plan will pay a fee or commission by reason of the acquisition or
redemption of shares in the Trust.
(d) The terms of each purchase or redemption of Trust shares shall remain at
least as favorable to an investing Plan as those obtainable in an arm's length
transaction with an unrelated party.

(e) The Consulting Group will provide written documentation to an Independent
Plan Fiduciary of its recommendations or evaluations based upon objective
criteria.

(f) Any recommendation or evaluation made by the Consulting Group to an
Independent Plan Fiduciary will be implemented only at the express direction of
such independent fiduciary.

(g) The Consulting Group will generally give investment advice in writing to
an Independent Plan Fiduciary with respect to all available Portfolios.
However, in the case of a Section 404(c) Plan, the Consulting Group will
provide investment advice that is limited to the Portfolios made available
under the Plan.

(h) Any Sub-Adviser that acts for the Trust to exercise investment discretion
over a Portfolio will be independent of SBS and its affiliates.

(i) Immediately following the acquisition by a Portfolio of any securities
that are issued by SBS and/or its affiliates, the percentage of that
Portfolio's net assets invested in such securities will not exceed one percent.

(j) The quarterly investment advisory fee that is paid by a Plan to the
Consulting Group for investment advisory services rendered to such Plan will be
offset by such amount as is necessary to assure that the Consulting Group
retains no more than 20 basis points from any Portfolio (with the exception of
the Government Money Investments Portfolio and the GIC Fund Portfolio for which
the Consulting Group and SBS Trust will retain no investment management fee)
which contains investments attributable to the Plan investor.

(k) With respect to its participation in the TRAK Program prior to purchasing
Trust shares.

(1) Each Plan will receive the following written or oral disclosures from the
Consulting Group:

(A) A copy of the Prospectus for the Trust discussing the investment
objectives of the Portfolios comprising the Trust, the policies employed to
achieve these objectives, the corporate affiliation existing between the
Consulting Group, SBS and its subsidiaries and the compensation paid to such
entities.

(B) Upon written or oral request to SBS, a Statement of Additional Information
supplementing the Prospectus which describes the types of securities and other
instruments in which the Portfolios may invest, the investment policies and
strategies that the Portfolios may utilize and certain risks attendant to those
investments, policies and strategies.

(C) A copy of the investment advisory agreement between the Consulting Group
and such Plan relating to participation in the TRAK Program.

(D) Upon written request of SBS, a copy of the respective investment advisory
agreement between the Consulting Group and the Sub-Advisers.

(E) In the case of a section 404(c) Plan, if required by the arrangement
negotiated between the Consulting Group and the Plan, an explanation by an SBS
Financial Consultant (the Financial Consultant) to eligible participants in
such Plan, of the services offered under the TRAK Program and the operation and
objectives of the Portfolios.

(F) Copies of PTE 92-77 and documents pertaining to the proposed replacement
exemption.

(2) If accepted as an investor in the TRAK Program, an Independent Plan
Fiduciary of an IRA or Keogh Plan, is required to acknowledge in writing, prior
to purchasing Trust shares that such fiduciary has received copies of the
documents described above in subparagraph (k)(1) of this section.

(3) With respect to a section 404(c) Plan, written acknowledgement of the
receipt of such documents will be provided by the Independent Plan Fiduciary
(i.e., the Plan administrator, trustee or named fiduciary, as the recordholder
of Trust shares). Such Independent Plan Fiduciary will be required to represent
in writing to SBS that such fiduciary is (a) independent of SBS and its
affiliates and (b) knowledgeable with respect to the Plan in administrative
matters and funding matters related thereto, and able to make an informed
decision concerning participation in the TRAK Program.

(4) With respect to a Plan that is covered under Title I of the Act, where
investment decisions are made by a trustee, investment

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manager or a named fiduciary, such Independent Plan Fiduciary is required to
acknowledge, in writing, receipt of such documents and represent to SBS that
such fiduciary is (a) independent of SBS and its affiliates, (b) capable of
making an independent decision regarding the investment of Plan assets and (c)
knowledgeable with respect to the Plan in administrative matters and funding
matters related thereto, and able to make an informed decision concerning
participation in the TRAK Program.

(l) Subsequent to its participation in the TRAK Program, each Plan receives
the following written or oral disclosures with respect to its ongoing
participation in the TRAK Program:

(1) The Trust's semi-annual and annual report which will include financial
statement for the Trust and investment management fees paid by each Portfolio.

(2) A written quarterly monitoring statement containing an analysis and an
evaluation of a Plan investor's account to ascertain whether the Plan's
investment objectives have been met and recommending, if required, changes in
Portfolio allocations.
(3) If required by the arrangement negotiated between the Consulting Group and
a section 404(c) Plan, a quarterly, detailed investment performance monitoring
report, in writing, provided to an Independent Plan Fiduciary of such Plan
showing, Plan level asset allocation, Plan cash flow analysis and annualized
risk adjusted rates of return for Plan investments. In addition, if required by
such arrangement, Financial Consultants will meet periodically with Independent
Plan Fiduciaries of section 404(c) Plans to discuss the report as well as with
eligible participants to review their accounts' performance.

(4) If required by the arrangement negotiated between the Consulting Group and
a section 404(c) Plan, a quarterly participant performance monitoring report
provided to a Plan participant which accompanies the participant's benefit
statement and describes the investment performance of the Portfolios, the
investment performance of the participant's individual investment in the TRAK
Program, and gives market commentary and toll-free numbers that will enable the
participant to obtain more information about the TRAK Program or to amend his
or her investment allocations.

(5) On a quarterly and annual basis, written disclosures to all Plans of the
(a) percentage of each Portfolio's brokerage commissions that are paid to SBS
and its affiliates and (b) the average brokerage commission per share paid by
each Portfolio to SBS and its affiliates; as compared to the average brokerage
commission per share paid by the Trust to brokers other than SBS and its
affiliates, both expressed as cents per share.

(m) SBS shall maintain, for a period of six years, the records necessary to
enable the persons described in paragraph (n) of this section to determine
whether the conditions of this exemption have been met, except that (1) a
prohibited transaction will not be considered to have occurred if, due to
circumstances beyond the control of SBS and/or its affiliates, the records are
lost or destroyed prior to the end of the six year period, and (2) no party in
interest other than SBS shall be subject to the civil penalty that may be
assessed under section 502(i) of the Act, or to the taxes imposed by section
4975(a) and (b) of the Code, if the records are not maintained, or are not
available for examination as required by paragraph (n) below.

(n)(1) Except as provided in section (2) of this paragraph and notwithstanding
any provisions of subsections (a)(2) and (b) of section 504 of the Act, the
records referred to in paragraph (m) of this section shall be unconditionally
available at their customary location during normal business hours by:

(A) Any duly authorized employee or representative of the Department or the
Service;

(B) Any fiduciary of a participating Plan or any duly authorized
representative of such fiduciary;

(C) Any contributing employer to any participating Plan or any duly authorized
employee representative of such employer; and

(D) Any participant or beneficiary of any participating Plan, or any duly
authorized representative of such participant or beneficiary.

(2) None of the persons described above in subparagraphs (B)-(D) of this
paragraph (n) shall be authorized to examine the trade secrets of SBS or
commercial or financial information which is privileged or confidential.

Section III. Definitions
For purposes of this exemption:

(a) An "affiliate" of SBS includes--

(1) Any person directly or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with SBS. (For purposes of
this subsection, the term "control" means the power to exercise a controlling
influence over the management or policies of a person other than an
individual.)

(2) Any officer, director or partner in such person, and

(3) Any corporation or partnership of which such person is an officer,
director or a 5 percent partner or owner.

(b) An "Independent Plan Fiduciary" is a Plan fiduciary which is independent
of SBS and its affiliates and is either--

(1) A Plan administrator, sponsor, trustee or named fiduciary, as the
recordholder of Trust shares of a section 404(c) Plan.

(2) A participant in a Keogh Plan.
(3) An individual covered under a self-directed IRA which invests in Trust
shares, or

(4) A trustee, investment manager or named fiduciary responsible for
investment decisions in the case of a Title I Plan that does not permit
individual direction as contemplated by section 404(c) of the Act.

Section IV. Effective Dates

This exemption will be effective as of July 31, 1993, except for transactions
involving the GIC Fund. The exemption will be effective upon its grant with
respect to the inclusion of the GIC Fund in the TRAK Program.

The availability of this proposed exemption is subject to the express
condition that the material facts and representations contained in the
applications for exemption are true and complete and accurately describe all
material terms of the transactions. In the case of continuing transactions, if
any of the material facts or representations described in the applications
change, the exemption will cease to apply as of the date of such change. In the
event of any such change, an application for a new exemption must be made to
the Department.

For a more complete statement of the facts and representations supporting the
Department's decision to grant PTE 92-77, refer to the proposed exemption and
grant notice which are cited above.

Signed at Washington, D.C. this 23rd day of March, 1994.

Ivan L. Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.

[FR Doc. 94-7271 Filed 3-28-94; 8:45 am]

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<PAGE>

- --------------------------------------------------------------------------------
[Prohibited Transaction Exemption 94-50; Application Nos. D-9337 and D-9415]

Smith Barney, Inc. (SBI) Located in New York, NY

AGENCY: Pension and Welfare Benefits Administration.

ACTION: Grant of individual exemption to modify and replace prohibited
transaction exemption (PTE) 92-77 involving Shearson Lehman Brothers, Inc.
(Shearson Lehman).
- --------------------------------------------------------------------------------
SUMMARY: This document contains an individual exemption which supersedes PTE
92-77 (57 FR 45833, October 5, 1992)./1/ This exemption permits the replacement
of Shearson Lehman with an entity known as "Smith Barney Inc."/2/ It also
allows SBI to adopt a daily-traded collective investment fund (the GIC Fund)
for Plans investing in the Consulting Group Capital Markets Funds (the Trust).
The exemption provides conditional relief that is identical to that provided by
PTE 92-77 and it will affect participants and beneficiaries of, and fiduciaries
with respect to, Plans participating in the Trust.

EFFECTIVE DATE: This exemption is effective July 31, 1993 for transactions that
are covered by PTE 92-77. With respect to transactions involving the GIC Fund,
the exemption is effective March 29, 1994.

SUPPLEMENTARY INFORMATION: On March 29, 1994, the Department of Labor (the
Department) published a notice of proposed exemption (the Notice) in the
Federal Register (59 FR 14680) that would replace PTE 92-77. PTE 92-77 provides
an exemption from certain prohibited transaction restrictions of section 406 of
the Employee Retirement Income Security Act of 1974 (the Act) and from the
sanctions resulting from the application of section 4975 of the Internal
Revenue Code of 1986 (the Code), as amended, by reason of section 4975(c)(1) of
the Code. The proposed exemption was requested in an application filed by SBI
pursuant to section 408(a) of the Act and section 4975(c)(2) of the Code, and
in accordance with the procedures (the Procedures) set forth in 29 CFR Part
2570, Subpart B (55 FR 32836, August 10, 1990). Effective December 31, 1978,
section 102 of Reorganization Plan No. 4 of 1978 (43 FR 47713, October 17,
1978) transferred the authority of the Secretary of the Treasury to issue
exemptions of the type requested to the Secretary of Labor. Accordingly, this
replacement exemption is being issued solely by the Department.
The Notice gave interested persons an opportunity to comment on the proposed
exemption and to request a public hearing. The only written comments submitted
to the Department during the comment period were made by SBI. These comments
expressed SBI's substantive concerns about the Notice and offered suggestions
for clarifying certain language of the Notice. Discussed below are SBI's
comments and the Department's responses thereto. Also discussed is a comment
made by the Department.

SBI's Comments
SBI notes that there is an ambiguity regarding the effective date of the GIC
Fund. SBI represents that the Notice provides in the last paragraph under the
heading "Supplementary Information," that with respect to transactions
involving the GIC Fund, the exemption "would become effective as of the date of
the grant of the notice of pendency." However, under the captions EFFECTIVE
DATES and DATES, SBI explains that the Notice states that the exemption will be
effective "upon its grant," or "as of the date the grant notice is published."
Because it was the intention of the parties that the effective date for
transactions involving the GIC Fund would be March 29, 1994, the date of
publication of the Notice in the Federal Register, SBI requests that the
Department make the exemption retroactive to this date for the GIC Fund.
The Department has considered SBI's comment and has made the requested
modification.
SBI wishes to modify the exemption in order that it may offer the GIC Fund to
both fiduciary-directed Plans as well as Plans providing for participant-
directed investments (the Section 404(c) Plans). The Department believes this
comment has merit and that it would be potentially beneficial to participants
and beneficiaries since it provides different types of Plans participating in
the TRAK Program with the opportunity to invest in the GIC Fund.
SBI explains that in the preamble to the Notice there is a statement to the
effect that it will "describe the GIC Fund in a prospectus (the Prospectus) and
promotional materials that will be furnished to Section 404(c) Plan
participants." SBI represents that interests in the GIC Fund are not subject to
the registration and Prospectus delivery requirements of the Securities Act of
1933. Also, SBI points out that the conditions of PTE 92-77 require it to
deliver copies of the Trust Prospectus only to the Plan administrator and not
to the individual participants. Because it has no practical means of delivering
Prospectuses or other disclosures to participants, SBI indicates that the
responsibility for providing these materials to participants rests with the
Plan administrator. In this regard, SBI represents that the
disclosure information it will make available to all Plans proposing to invest
in the GIC Fund will include copies of the Trust Prospectus and a separate
description of the GIC Fund's investment objectives, policies and processes.
SBI explains that its description of the GIC Fund will be designed to provide a
participant with sufficient information in order that the participant can make
an informed investment decision.
The Department concurs with these comments.
In addition to principal comments discussed above, SBI has made certain
technical clarifications and updates to the Notice in the following areas:

(1) General.
a. Redesignations. SBI explains that effective December 31, 1993, Primerica
Corporation changed its name to "The Travelers Inc." and that effective May 9,
1994, the "Trust for TRAK Investments" was renamed "Consulting Group Capital
Markets Funds." Also effective June 1, 1994, "Smith Barney Shearson Inc." was
renamed "Smith Barney Inc."

(2) Supplementary Information.
a. Asset Sale Transaction. SBI explains that the transaction by which Smith
Barney Harris Upham & Company, Inc. (Smith Barney) acquired Shearson Lehman and
its Asset Management Divisions was an asset sale and not a merger. Accordingly,
SBI suggests that the fourth sentence of the third
- -------
/1/ PTE 92-77 provides exemptive relief from section 406(a) of the Act and the
sanctions resulting from the application of section 4975 of the Code, by reason
of section 4975(c)(1) (A) through (D) of the Code, with respect to the purchase
or redemption of shares in the Trust for TRAK Investments (which has been
redesignated as the "Consulting Group Capital Markets Funds" and is referred to
herein as the Trust) by Plans investing therein. In addition, PTE 92-77
provides exemptive relief from the restrictions of section 406(b)(1) and (b)(2)
of the Act and the sanctions resulting from the application of section 4975 of
the Code, by reason of section 4975(c)(1)(E) of the Code, with respect to the
provision, by the Consulting Group of Shearson Lehman, of investment advisory
services to an Independent Plan Fiduciary of a Plan participating in the TRAK
Personalized Investment Advisory Service (the TRAK Program) which may result in
such fiduciary's selection of a Portfolio in the TRAK Program for the
investment of Plan assets.
/2/ Effective June 1, 1994, Smith Barney Shearson, Inc. (SBS) was renamed
"Smith Barney Inc." Hereinafter, SBS is referred to in this grant notice as
either "Smith Barney Inc." or "SBI."
B-5
<PAGE>

paragraph under the heading "Supplementary Information," read as follows: "As a
result of the transaction, most of the assets and business of the Shearson
divisions were transferred to Smith Barney, which was renamed "Smith Barney
Shearson Inc.' "
b. Fees Paid to Transfer Agent. SBI represents that in the seventh paragraph
under the heading "Supplementary Information," the Notice states that The
Shareholder Services Group (TSSG), as transfer agent, will charge a fee of
$8.50 to $9.50 per plan for its transfer agency services. While these are the
current expected fee levels, SBI notes that such fees may increase or decrease
in the future. Because TSSG is no longer an affiliate, SBI requests that the
paragraph be amended to provide that TSSG as transfer agent will receive a
reasonable fee for its services rather than specifying a precise dollar amount.

(3) General Conditions.
a. Written Disclosures. Section II(k)(1)(F) of the General Conditions of the
Notice states that SBI will provide copies of PTE 92-77 and documents
pertaining to the proposed replacement exemption to each Plan participating in
the TRAK Program. SBI wishes to clarify that the "documents pertaining to the
proposed replacement exemption" refer to copies of the Notice and, when issued,
the final exemption.
The Department concurs with the above supplemental clarifications to the
Notice that have been made by SBI and hereby incorporates these changes, as
well as the substantive changes also described above, by reference into the
Notice and, where applicable, into this final exemption.

Department's Comment
Section III of the Notice, which is captioned "Definitions," provides several
meanings of the term "Independent Plan Fiduciary" in subparagraph (b). For
purposes of the exemption, the term "Independent Plan Fiduciary" may include a
Plan administrator, a participant in a Keogh Plan, an individual covered under
a self-directed IRA or a trustee of a Title I Plan that does not permit
participant-directed investments as contemplated under section 404(c) of the
Act. However, due to an oversight, the definition does not extend to a
participant in a Section 404(c) Plan. Because the TRAK Program is being
marketed as an investment alternative to Section 404(c) Plans and the
individual participant of such Plan makes the decision on whether to invest
therein, the Department has amended the definition of the term "Independent
Plan Fiduciary" by providing a new subparagraph (b)(5) which includes a Section
404(c) Plan participant.
Accordingly, after consideration of the entire exemption record, including the
written comments, the Department has determined to grant the replacement
exemption as modified herein.

General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption under section
408(a) of the Act and section 4975(c)(2) of the Code does not relieve a
fiduciary or other party in interest or disqualified person from certain other
provisions of the Act and the Code, including any prohibited transaction
provisions to which the exemption does not apply and the general fiduciary
responsibility provisions of section 404 of the Act, which require, among other
things, a fiduciary to discharge his or her duties respecting the plan solely
in the interest of the participants and beneficiaries of the plan and in a
prudent fashion in accordance with section 404(a)(1)(B) of the Act; nor does it
affect the requirements of section 401(a) of the Code that the plan operate for
the exclusive benefit of the employees of the employer maintaining the plan and
their beneficiaries;
(2) In accordance with section 408(a) of the Act and section 4975(c)(2) of the
Code, the Department has found that the exemption is administratively feasible,
in the interest of the Plans and their participants and beneficiaries and
protective of the rights of participants and beneficiaries of the Plans; and
(3) The exemption is supplemental to, and not in derogation of, any other
provisions of the Act and the Code, including statutory or administrative
exemptions. Furthermore, the fact that a transaction is subject to an
administrative or statutory exemption is not dispositive of whether the
transaction is in fact a prohibited transaction.
(4) In addition to transactions involving the GIC Fund, the exemption is
applicable to the transactions previously described in PTE 92-77 only if the
conditions specified therein are met.

Exemption
Under the authority of section 408(a) of the Act and section 4975(c)(2) of the
Code and in accordance with the Procedures cited above, the Department hereby
replaces PTE 92-77 as follows:

Section I. Covered Transactions
(a) The restrictions of section 406(a) of the Act and the sanctions resulting
from the application of section 4975 of the Code, by reason of section
4975(c)(1)(A) through (D) of the Code, shall not apply to the purchase or
redemption of shares by Plans in the SBI-established Trust in connection with
such Plans' participation in the TRAK Personalized Investment Advisory Service.
(b) The restrictions of section 406(b) of the Act and the sanctions resulting
from the application of section 4975 of the Code by reason of section
4975(c)(1)(E) and (F) of the Code, shall not apply to the provision, by the
Consulting Group, of investment advisory services to an Independent Plan
Fiduciary of a participating Plan which may result in such fiduciary's
selection of a Portfolio in the TRAK Program for the investment of Plan assets.
The exemption is subject to the following conditions that are set forth in
Section II.

Section II. General Conditions
(a) The participation of Plans in the TRAK Program will be approved by an
Independent Plan Fiduciary. For purposes of this requirement, an employee,
officer or director of SBI and/or its affiliates covered by an IRA not subject
to Title I of the Act will be considered an Independent Plan Fiduciary with
respect to such IRA.
(b) The total fees paid to the Consulting Group and its affiliates will
constitute no more than reasonable compensation.
(c) No Plan will pay a fee or commission by reason of the acquisition or
redemption of shares in the Trust.
(d) The terms of each purchase or redemption of Trust shares remain at least
as favorable to an investing Plan as those obtainable in an arm's length
transaction with an unrelated party.
(e) The Consulting Group will provide written documentation to an Independent
Plan Fiduciary of its recommendations or evaluations based upon objective
criteria.
(f) Any recommendation or evaluation made by the Consulting Group to an
Independent Plan Fiduciary will be implemented only at the express direction of
such independent fiduciary.
(g) The Consulting Group will generally give investment advice in writing to
an Independent Plan Fiduciary with respect to all available Portfolios.
However, in the case of a Section 404(c) Plan, the Consulting Group will
provide investment advice that is limited to the Portfolios made available
under the Plan.

B-6
<PAGE>

(h) Any Sub-Adviser that acts for the Trust to exercise investment discretion
over a Portfolio will be independent of SBI and its affiliates.
(i) immediately following the acquisition by a Portfolio of any securities
that are issued by SBI and/or its affiliates, the percentage of that
Portfolio's net assets invested in such securities will not exceed one percent.
(j) The quarterly investment advisory fee that is paid by a Plan to the
Consulting Group for investment advisory services rendered to such Plan will be
offset by such amount as is necessary to assure that the Consulting Group
retains no more than 20 basis points from any Portfolio (with the exception of
the Government Money Investments Portfolio and the GIC Fund Portfolio for which
the Consulting Group and SBI Trust will retain no investment management fee)
which contains investments attributable to the Plan investor.
(k) With respect to its participation in the TRAK Program prior to purchasing
Trust shares.
(1) Each Plan will receive the following written or oral disclosures from the
Consulting Group:
(A) A copy of the Prospectus for the Trust discussing the investment
objectives of the Portfolios comprising the Trust, the policies employed to
achieve these objectives, the corporate affiliation existing between the
Consulting Group, SBI and its subsidiaries and the compensation paid to such
entities./3/
(B) Upon written or oral request to SBI, a Statement of Additional Information
supplementing the Prospectus which describes the types of securities and other
instruments in which the Portfolios may invest, the investment policies and
strategies that the Portfolios may utilize and certain risks attendant to those
investments, policies and strategies.
(C) A copy of the investment advisory agreement between the Consulting Group
and such Plan relating to participation in the TRAK Program.
(D) Upon written request of SBI, a copy of the respective investment advisory
agreement between the Consulting Group and the Sub-Advisers.
(E) In the case of a Section 404(c) Plan, if required by the arrangement
negotiated between the Consulting Group and the Plan, an explanation by an SBI
Financial Consultant (the Financial Consultant) to eligible participants in
such Plan, of the services offered under the TRAK Program and the operation and
objectives of the Portfolios.
(F) Copies of PTE 92-77 and documents pertaining to the replacement exemption.
(2) If accepted as an investor in the TRAK Program, an Independent Plan
Fiduciary of an IRA or Keogh Plan, is required to acknowledge, in writing,
prior to purchasing Trust shares that such fiduciary has received copies of the
documents described above in subparagraph (k)(1) of this Section.
(3) With respect to a Section 404(c) Plan, written acknowledgement of the
receipt of such documents will be provided by the Independent Plan Fiduciary
(i.e., the Plan administrator, trustee or named fiduciary, as the recordholder
of Trust shares). Such Independent Plan Fiduciary will be required to represent
in writing to SBI that such fiduciary is (a) independent of SBI and its
affiliates and (b) knowledgeable with respect to the Plan in administrative
matters and funding matters related thereto, and able to make an informed
decision concerning participation in the TRAK Program.
(4) With respect to a Plan that is covered under Title I of the Act, where
investment decisions are made by a trustee, investment manager or a named
fiduciary, such Independent Plan Fiduciary is required to acknowledge, in
writing, receipt of such documents and represent to SBI that such fiduciary is
(a) independent of SBI and its affiliates, (b) capable of making an independent
decision regarding the investment of Plan assets and (c) knowledgeable with
respect to the Plan in administrative matters and funding matters related
thereto, and able to make an informed decision concerning participation in the
TRAK Program.
(l) Subsequent to its participation in the TRAK Program, each Plan receives
the following written or oral disclosures with respect to its ongoing
participation in the TRAK Program:
(1) The Trust's semi-annual and annual report which will include financial
statement for the Trust and investment management fees paid by each Portfolio.
(2) A written quarterly monitoring statement containing an analysis and an
evaluation of a Plan investor's account to ascertain whether the Plan's
investment objectives have been met and recommending, if required, changes in
Portfolio allocations.
(3) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly, detailed investment performance monitoring
report, in writing, provided to an Independent Plan Fiduciary of such Plan
showing, Plan level asset allocations, Plan cash flow analysis and annualized
risk adjusted rates of return for Plan investments. In addition, if required by
such arrangement, Financial Consultants will meet periodically with Independent
Plan Fiduciaries of Section 404(c) Plans to discuss the report as well as with
eligible participants to review their accounts' performance.
(4) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly participant performance monitoring report
provided to a Plan participant which accompanies the participant's benefit
statement and describes the investment performance of the Portfolios, the
investment performance of the participant's individual investment in the TRAK
Program, and gives market commentary and toll-free numbers that will enable the
participant to obtain more information about the TRAK Program or to amend his
or her investment allocations.
(5) On a quarterly and annual basis, written disclosures to all Plans of the
(a) percentage of each Portfolio's brokerage commissions that are paid to SBI
and its affiliates and (b) the average brokerage commission per share paid by
each Portfolio to SBI and its affiliates, as compared to the average brokerage
commission per share paid by the Trust to brokers other than SBI and its
affiliates, both expressed as cents per share.
(m) SBI shall maintain, for a period of six years, the records necessary to
enable the persons described in paragraph (n) of this Section to determine
whether the conditions of this exemption have been met, except that (1) a
prohibited transaction will not be considered to have occurred if, due to
circumstances beyond the control of SBI and/or its affiliates, the records are
lost or destroyed prior to the end of the six year period, and (2) no party in
interest other than SBI shall be subject to the civil penalty that may be
assessed under section 502(i) of the Act, or to the taxes imposed by section
4975(a) and (b) of the Code, if the records are not maintained, or are not
available for
- -------
/3/ The fact that certain transactions and fee arrangements are the subject of
an administrative exemption does not relieve the Independent Plan Fiduciary
from the general fiduciary responsibility provisions of section 404 of the Act.
In this regard, the Department expects the Independent Plan Fiduciary to
consider carefully the totality of fees and expenses to be paid by the Plan
including the fees paid directly to SBI or to other third parties and paid
directly through the Trust to SBI.

B-7
<PAGE>

examination as required by paragraph (n) below.
(n)(1) Except as provided in section (2) of this paragraph and notwithstanding
any provisions of subsections (a)(2) and (b) of section 504 of the Act, the
records referred to in paragraph (m) of this Section shall be unconditionally
available at their customary location during normal business hours by:
(A) Any duly authorized employee or representative of the Department or the
Internal Revenue Service;
(B) Any fiduciary of a participating Plan or any duly authorized
representative of such fiduciary;
(C) Any contributing employer to any participating Plan or any duly authorized
employee representative of such employer; and
(D) Any participant or beneficiary of any participating Plan, or any duly
authorized representative of such participant or beneficiary.
(2) None of the persons described above in subparagraphs (B)-(D) of this
paragraph (n) shall be authorized to examine the trade secrets of SBI or
commercial or financial information which is privileged or confidential.

Section III. Definitions
For purposes of this exemption:
(a) An "affiliate" of SBI includes--
(1) Any person directly or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with SBI. (For purposes of
this subsection, the term "control" means the power to exercise a controlling
influence over the management or policies of a person other than an
individual.)
(2) Any officer, director or partner in such person, and
(3) Any corporation or partnership of which such person is an officer,
director or a 5 percent partner or owner.
(b) An "Independent Plan Fiduciary" is a Plan fiduciary which is independent
of SBI and its affiliates and is either
(1) A Plan administrator, sponsor, trustee or named fiduciary, as the
recordholder of Trust shares of a Section 404(c) Plan,
(2) A participant in a Keogh Plan,
(3) An individual covered under a self-directed IRA which invests in Trust
shares,
(4) A trustee, investment manager or named fiduciary responsible for
investment decisions in the case of a Title I Plan that does not permit
individual direction as contemplated by Section 404(c) of the Act, or
(5) A participant in a Section 404(c) Plan.

Section IV. Effective Dates
This exemption will be effective as of July 31, 1993, except for transactions
involving the GIC Fund. The exemption will be effective March 29, 1994 with
respect to the inclusion of the GIC Fund in the TRAK Program.
The availability of this exemption is subject to the express condition that
the material facts and representations contained in the applications for
exemption are true and complete and accurately describe all material terms of
the transactions. In the case of continuing transactions, if any of the
material facts or representations described in the applications change, the
exemption will cease to apply as of the date of such change. In the event of
any such change, an application for a new exemption must be made to the
Department.
For a more complete statement of the facts and representations supporting the
Department's decision to grant PTE 92-77, refer to the proposed exemption and
grant notice which are cited above.
Signed at Washington, DC, this 16th day of June 1994.

Ivan L. Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.

[FR Doc. 94-15006 Filed 6-20-94; 8:45 am]
BILLING CODE 4510-28-P

B-8
<PAGE>

Federal Register: November 9, 1998 (Volume 63, Number 216)
Notices
Page 60391-60398
From the Federal Register Online via GPO Access [wais.access.gpo.gov]

- --------------------------------------------------------------------------------
DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration [Application No. D-10574]

Notice of Proposed Individual Exemption to Amend Prohibited Transaction
Exemption (PTE) 94-50 Involving Salomon Smith, Barney Inc. (Salomon Smith
Barney) Located in New York, NY

AGENCY: Pension and Welfare Benefits Administration, U.S. Department of Labor.

ACTION: Notice of proposed individual exemption to modify PTE 94-50.
- --------------------------------------------------------------------------------

SUMMARY: This document contains a notice of pendency before the Department of
Labor (the Department) of a proposed individual exemption which, if granted,
would amend PTE 94-50 (59 FR 32024, June 21, 1994), an exemption granted to
Smith Barney, Inc. (Smith Barney), the predecessor of Salomon Smith Barney.
PTE 94-50 relates to the operation of the TRAK Personalized Investment Advisory
Service product (the TRAK Program) and the Trust for TRAK Investments
(subsequently renamed the Trust for Consulting Group Capital Markets Funds)
(the Trust). If granted, the proposed exemption would affect participants and
beneficiaries of and fiduciaries with respect to employee benefit plans (the
Plans) participating in the TRAK Program.

EFFECTIVE DATE: If granted, the proposed amendments will be effective as of
November 9, 1998.

DATES: Written comments and requests for a public hearing should be received by
the Department on or before December 24, 1998.

ADDRESSES: All written comments and requests for a public hearing (preferably,
three copies) should be sent to the Office of Exemption Determinations, Pension
and Welfare Benefits Administration, Room N-5649, U.S. Department of Labor, 200
Constitution Avenue, N.W., Washington, D.C. 20210, Attention: Application No.
D-10574. The application pertaining to the proposed exemption and the comments
received will be available for public inspection in the Public Documents Room
of the Pension and Welfare Benefits Administration, U.S. Department of Labor,
Room N-5507, 200 Constitution Avenue, N.W., Washington, D.C. 20210.

SUPPLEMENTARY INFORMATION: Notice is hereby given of the pendency before the
Department of a proposed exemption that would amend PTE 94-50. PTE 94-50
provides an exemption from certain prohibited transaction restrictions of
section 406 of the Employee Retirement Income Security Act of 1974 (the Act)
and from the sanctions resulting from the application of section 4975 of the
Internal Revenue Code of 1986 (the Code), as amended, by reason of section
4975(c)(1) of the Code. Specifically, PTE 94-50 provides exemptive relief from
the restrictions of section 406(a) of the Act and the sanctions resulting from
the application of section 4975 of the Code, by reason of section 4975(c)(1)(A)
through (D) of the Code, for the purchase or redemption of shares in the Trust
by an employee benefit plan, an individual retirement account (the IRA), or a
retirement plan for a self-employed individual (the Keogh Plan). PTE 94-50 also
provides exemptive relief from the restrictions of section 406(b) of the Act
and the sanctions resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(E) and (F) of the Code, with respect to the
provision, by the Consulting Group of Smith Barney (the Consulting Group), of
investment advisory services to independent fiduciaries of participating Plans
(the Independent Plan Fiduciaries) that might result in such fiduciary's
selection of an investment portfolio (the Portfolio) under the TRAK Program for
the investment of Plan assets.\/1/

[Page 60392]
Besides the transactions described above, PTE 94-50 permitted Smith Barney to
add a daily-traded collective investment fund (the GIC Fund) to the existing
Fund Portfolios and to describe the various entities operating the GIC Fund.
Further, PTE 94-50 replaced references to Shearson Lehman with references to
Smith Barney. PTE 94-50 is effective as of July 31, 1993 for the transactions
described in PTE 92-77 and effective as of March 29, 1994 with respect to
transactions involving the GIC Fund.
As of December 31, 1997, the TRAK Program held assets that were in excess of
$8.4 billion. Of those assets, approximately $1.7 billion were held in 540,
401(k) Plan accounts and approximately 57,100 employee benefit plan and
IRA/Keogh-type accounts. At present, the Trust consists of 13 Portfolios that
are managed by the Consulting Group and advised by one or more unaffiliated
sub-advisers selected by Salomon Smith Barney.
Salomon Smith Barney has informed the Department of certain changes, which are
discussed below, to the facts underlying PTE 94-50. These modifications include
(1) corporate mergers that have changed the names of the parties described in
PTE 94-50 and would permit broader distribution of TRAK-related products, (2)
the implementation of a recordkeeping reimbursement offset system (the
Recordkeeping Reimbursement Offset Procedure) under the TRAK Program, and (3)
the institution of an automated reallocation option (the Automatic Reallocation
Option) under the TRAK Program for which Salomon Smith Barney has requested
administrative exemptive relief from the Department.
The proposed exemption has been requested in an application filed on behalf of
Salomon Smith Barney pursuant to section 408(a) of the Act and section
4975(c)(2) of the Code, and in accordance with the procedures set forth in 29
CFR Part 2570, Subpart B (55 FR 32836, August 10, 1990). Effective December 31,
1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR 47713, October
17, 1978) transferred the authority of the Secretary of the Treasury to issue
exemptions of the type requested to the Secretary of Labor. Accordingly, the
- -------
/1/ On October 5, 1992, the Department granted PTE 92-77 at 55 FR 45833. PTE
92-77 permitted Shearson Lehman Brothers, Inc. (Shearson Lehman) to make the
TRAK Program available to Plans that acquired shares in the Trust. In this
regard, PTE 92-77 permitted Plans to purchase or redeem shares in the Trust and
allowed the Consulting Group to provide investment advisory services to an
Independent Fiduciary of a Plan which might result in such fiduciary's
selection of a Portfolio in the TRAK Program for the investment of Plan assets.
Subsequent to the granting of PTE 92-77, on July 31, 1993, Smith Barney
acquired certain assets of Shearson Lehman associated with its retail business,
including the TRAK Program, and applied for and received a new exemption (PTE
94-50) for the ongoing operation of the TRAK Program. Essentially, PTE 94-50
amended and replaced PTE 92-77. However, because of certain material factual
changes to the representations supporting PTE 92-77, the Department determined
that the exemption was no longer effective for use by Smith Barney and its
subsidiaries as of the date of the asset sale.

B-9
<PAGE>

proposed exemption is being issued solely by the Department.
1. The Corporate Mergers. Salomon Smith Barney states that in November 1997, a
subsidiary of the Travelers Group Inc. (the Travelers Group), the parent of
Smith Barney, acquired all of the shares of Salomon Brothers, Inc. (Salomon).
Subsequent to the acquisition, Salomon and Smith Barney were operated as
separately-registered broker-dealers and as sister corporations with a common
parent. On September 1, 1998, Salomon was merged with and into Smith Barney,
with Smith Barney remaining as the surviving corporation. As a result of the
merger, the corporate name of Smith Barney has been changed to "Salomon Smith
Barney Inc."
Salomon Smith Barney also states that in April 1998, the Travelers Group and
Citicorp Inc. (Citicorp) announced a stock merger whereby Citicorp would be
merged with and into a subsidiary of the Travelers Group. As a result of the
merger, the Travelers Group would become a bank holding company and change its
name to "Citigroup Inc." (Citigroup).
Salomon Smith Barney represents that the purpose of the merger is to create
more distribution channels for TRAK products. In this regard, registered
broker-dealers associated with Citigroup will be permitted to market the TRAK
Program under a different product name. However, Salomon Smith Barney explains
that the terms and conditions of PTE 94-50 and this amendment will be complied
with by the parties involved.
The merger, which occurred on October 8, 1998, required that the affected
parties obtain approval from the Federal Reserve Board under the Bank Holding
Company Act (the BHC Act). Under the BHC Act, the Federal Reserve Board does
not authorize bank holding companies, such as Citigroup, to be affiliated with
companies that organize, sponsor, control or distribute United States open-end
mutual funds. As a bank holding company, Citigroup is required to engage an
independent party to provide certain distribution services in connection with
the marketing of mutual fund shares) for all United States, publicly-traded
mutual funds for which any subsidiary of the Travelers Group/Citigroup acts as
a distributor. Salomon Smith Barney notes that although the Funds participating
in the TRAK Program will be affected by this change, no Plan will be required
to pay distribution fees to the independent distributors.
On October 15, 1998, Salomon Smith Barney was merged with and into Pendex Real
Estate Corp. (Pendex), a shell corporation domiciled in New York. Pendex, the
survivor of the merger, was then renamed "Salomon Smith Barney Inc." Upon
completion of this merger, Salomon Smith Barney became a New York corporation.
2. Recordkeeping Reimbursement Offset Procedure. Salomon Smith Barney states
that the Board of Trustees (the Board) of the Funds approved, but has not yet
implemented, a recordkeeping reimbursement offset procedure under which a Plan
participating in the TRAK Program would be permitted to reduce its investment
fees and expenses. The
reimbursement amount would be paid solely by the Funds as a means of being
competitive with other mutual funds offering similar reimbursements to
investors.
In May 1998, the Board approved a recordkeeping reimbursement amount of $12.50
for each investment position held by a participant. (In other words, a
participant holding positions in three different Funds would be eligible to
receive a total annual reimbursement of $37.50). In addition, the Board
resolved that after applying such reimbursement to recordkeeping expenses
charged by recordkeepers of the Plans, any excess reimbursement amount would be
applied to reduce other fees and expenses/2/ payable by participating Plans,
including, but not limited to, the Plan-level investment advisory fee payable
to the Consulting Group for asset allocation recommendations (the Outside Fee),
after the appropriate offset has been applied (the Net Outside Fee)./3/ If
implemented, Salomon Smith Barney explains that the Funds would pay the
appropriate reimbursement amount directly to the recordkeeper of the Plan. The
affected Plan would then be required to pay only the balance of the fee, which
is generally charged on a quarterly basis, after the excess reimbursement
amount has been deducted.
The Recordkeeping Reimbursement Offset Procedure would work as follows:
Assume that Plan A has $1 million in assets invested in the TRAK Program and
100 participants. Assume further that Plan A pays its recordkeeper $20 per
participant per year in Annual Fees totaling $2,000 per year or

[Page 60393]
$500 per quarter and $12 per participant per year in Other Fees, totaling
$1,200 per year or $300 per quarter. In addition, Plan A pays the Consulting
Group a total annual net investment advisory fee (i.e., the Net Outside Fee) of
$8,500.
At the end of each calendar quarter, Plan A's recordkeeper will determine the
actual number of Fund positions held by the Plan A participants and calculate
the resulting reimbursement amount. If Plan A had 300 participant positions at
the end of the quarter, the Plan's total recordkeeping reimbursement amount
would be 300 x $3.125 (the annual amount of $12.50
divided by 4) or $937.50. That amount would be credited as follows:

Application of Reimbursement to Recordkeeping Fees
<TABLE>
<S> <C>
Quarterly Portion of Annual Fees...................................... $ 500.00
Quarterly Portion of Other Fees....................................... 300.00
--------
Total Quarterly Recordkeeping Fees.................................... 800.00
Credit for Reimbursement.............................................. (937.50)
Excess Reimbursement.................................................. (137.50)
--------
</TABLE>
Because the reimbursement amount exceeds the recordkeeping fees due for the
quarter, the Plan does not owe any recordkeeping fee for that period.
Therefore, the recordkeeper will not bill the Plan.

Application of Excess Reimbursement to the Net Outside Fee
<TABLE>
<S> <C>
Quarterly Net Outside Fee............................................ $2,125.00
Excess Reimbursement................................................. (137.50)
---------
Total.............................................................. 1,987.50
---------
</TABLE>

The recordkeeper will advise the Consulting Group that it is entitled to bill
the Plan for the $1,987.50 balance of its investment advisory fee (i.e., the
Net Outside Fee).
Upon participation in the TRAK Program, an Independent Plan Fiduciary selects
a recordkeeper for the Plan, from a list of recordkeepers which maintain
computer links to the Funds under the TRAK Program. Salomon Smith Barney states
that of the 23 recordkeepers currently providing services to TRAK Program
investors, only one, Smith Barney Plan Services, is an

- -------
/2/ In addition to annual recordkeeping fees (the Annual Fees) payable by a
Plan participating in the TRAK Program, it is represented that a Plan might be
required to pay recordkeeping fees associated with certain particular services
(the Other Fees) such as initial plan set-up and conversion, preparation of
annual filings, enrollment, special statement preparation and audit.
/3/ Salomon Smith Barney is offsetting, quarterly, against the Outside Fee,
such amount as is necessary to assure that the Consulting Group retains not
more than 20 basis points (as an Inside Fee) from any Portfolio on investment
assets attributable to any Plan.

B-10
<PAGE>

affiliate. Because the reimbursement rate and the timing of the offset of the
excess reimbursement amount against fees will be the same regardless of the
identity of the recordkeeper and the Independent Plan Fiduciary is responsible
for the selection of this particular recordkeeper, Salomon Smith Barney
believes its affiliation with Smith Barney Plan Services does not appear to
present additional potential abuses under section 406(b)(1) or 406(b)(3) of the
Act in its capacity as an investment adviser in recommending investment in the
Funds to Independent Plan Fiduciaries.

Salomon Smith Barney notes that the reasoning in the Frost National Bank
Advisory Opinion (ERISA Advisory Opinion 97-15A, May 22, 1997) (the Frost
Opinion), is relevant to this situation. Therefore, it has not requested
administrative exemptive relief from the Department. Salomon Smith Barney
explains that in the Frost Opinion, the bank offered a comprehensive program of
administrative and investment services to Plan investors. Under this program,
the Department opined that section 406(b)(1) and 406(b)(3) of the Act would not
be violated if the bank received payments for services from mutual funds while
recommending mutual fund investments to plans provided such payments were fully
disclosed and then offset to reduce other plan expenses, with any excess
payments made to the plans. Salomon Smith Barney further explains that in the
Frost Opinion any benefit from payments made by the mutual funds benefitted the
plans and not the bank.

With respect to the TRAK Program, Salomon Smith Barney represents that the
reimbursement rates adopted by the Funds will be fully disclosed to Independent
Plan Fiduciaries and the offset of the excess reimbursement amount against a
Plan's expenses will be accomplished in a manner to ensure that the Plans
obtain the full benefit of the reimbursement to reduce their recordkeeping and
other Plan expenses. Salomon Smith Barney submits that the reasoning in the
Frost Opinion would apply equally to the proposed reimbursement of expenses
under the TRAK Program. Therefore, Salomon Smith Barney does not believe any
change in the scope of the exemption is necessary./4/

3. The Automatic Reallocation Option. Salomon Smith Barney wishes to modify
the TRAK Program to institute an automated reallocation feature whereby an
Independent Plan Fiduciary could elect to have his or her current asset
allocation adjusted automatically whenever the Consulting Group changes the
recommended asset allocation model (the Allocation Model) followed by such Plan
or participant./5/ Therefore, Salomon Smith Barney proposes to amend General
Condition II(f) of PTE 94-50 which requires that any recommendation or
evaluation offered by the Consulting Group be implemented only upon the express
direction of the Independent Plan Fiduciary. With the exception of the
requested changes to General Condition II(f) of PTE 94-50, all of the existing
conditions of PTE 94-50 will continue to apply to the TRAK Program.
As noted above, General Condition II(f) of PTE 94-50 provides that any
recommendation or evaluation by the Consulting Group to an Independent Plan
Fiduciary will be implemented only at the express direction of such fiduciary.
Accordingly, under the current exemption, whenever asset allocation advice is
modified by the Consulting Group, Salomon Smith Barney states that its
Financial Consultants are required to contact the Independent Plan Fiduciary of
each Plan who has chosen the Allocation Model, and obtain such fiduciary's
consent to modification of the asset allocation applied to the Plan's account.
Salomon Smith Barney notes that many TRAK Program investors have expressly
indicated that they expect reallocations to take place in the ordinary course
of the provision of investment advisory services offered by the Consulting
Group. However, these investors do not understand why they need to be contacted
in each instance

[Page 60394]
for this purpose. In addition, Salomon Smith Barney explains that the case-by-
case contact and reallocation involves delay in implementing the change at the
client's express direction, putting similarly-situated investors into the new
Allocation Models at different times.
To resolve these problems, Salomon Smith Barney proposes to offer TRAK Program
investors an Automatic Reallocation Option. Because Salomon Smith Barney
recognizes that the Automatic Reallocation Option is outside the scope of PTE
94-50, it requests a modification of the existing terms of PTE 94-50 to the
extent necessary to allow it to offer this alternative to investors. If the
exemptive relief is granted, Salomon Smith Barney represents that it will fully
disclose the nature of the Automatic Reallocation Option to the Independent
Plan Fiduciary of each existing client Plan in a written notice (the
Announcement) and permit the fiduciary to elect the Automatic Reallocation
Option by responding in writing. The Announcement will describe the intended
operation of the Automatic Reallocation Option and how future changes to the
Allocation Model selected on behalf of the Plan will be implemented. In order
to implement the Automatic Reallocation Option for new TRAK Program investors,
the Independent Plan Fiduciary will be required to check a box on the form of
Investment Advisory contract with Salomon Smith Barney (or on a separate
document designed for this purpose for those investors who have already
executed such an agreement with Salomon Smith Barney). By checking the box, the
Independent Plan Fiduciary will indicate its consent to and authorization of
actions to be taken by Salomon Smith Barney to reallocate automatically the
asset allocation in the Plan account whenever the Consulting Group modifies the
particular asset allocation recommendation which the Plan or participant has
chosen. Such election will continue in effect until revoked or terminated by
the Plan, in writing.
In operation, Salomon Smith Barney represents that the Automatic Reallocation
Option will work as follows:
(a) The Consulting Group will release a modified version of the Allocation
Model for the Plan account based upon its amended recommendation.

- -------
/4/ In this proposed exemption, the Department expresses no opinion on whether
the Frost Opinion is applicable to the recordkeeping reimbursement procedure
described above. In this regard, the Department notes that, under the facts
presented in the Frost Opinion, Frost would offset the fees received from the
mutual funds on a dollar-for-dollar basis against the trustee fees that the
plan was otherwise obligated to pay Frost.
- -------
/5/ Salomon Smith Barney notes that the Automatic Reallocation Option is to be
distinguished from "rebalancing" which occurs after the passage of time from
the original allocation decision and changes a participant's investment mix to
bring the actual allocation among investment alternatives back in line with the
participant's original allocation choices. For example, Salomon Smith Barney
states that a Plan participant receives a written quarterly review that sets
forth information concerning the participant's investments and includes a chart
comparing the original asset allocation recommendation and the actual
percentage distribution of investments held in the portfolio. Salomon Smith
Barney explains that under the chart is the following legend:
TRAK is a non-discretionary investment advisory service. All investment
decisions rest with you, the participant. Therefore, you are strongly urged to
adhere to the Consulting Group's asset allocation recommendations. Please call
your Financial Consultant should a change in allocation be warranted due to a
significant difference between the portfolio originally recommended by the
Consulting Group and your allocation or due to a change in your objectives.
Salomon Smith Barney further explains that the Financial Consultant is
expected to contact participants at least annually to encourage a comparison of
the holdings in the portfolio against the Consulting Group's original
recommendation. Barney proposes to amend General Condition II(f) of PTE 94-50
which requires that any recommendation or evaluation offered by the Consulting
Group be implemented only upon the express direction of the Independent Plan
Fiduciary. With the exception of the requested changes to General Condition
II(f) of PTE 94-50, all of the existing conditions of PTE 94-50 will continue
to apply to the TRAK Program.

B-11
<PAGE>

(b) On the day such modification is released, the Consulting Group will adjust
the Plan account to fit the new Allocation Model and to reflect current market
conditions./6/ Such adjustments will be effected through a series of purchases
and redemptions of Portfolio shares to increase or decrease the relative
investment in the various Portfolios by the Plan account.
(c) The reallocation of the Plan account will be effected on the same business
day as the release of the new Allocation Model by the Consulting Group, except
to the extent market conditions and orderly purchase and redemption procedures
may delay such processing. For purposes of calculating the percentage changes
in its asset allocation recommendation underlying the Automatic Reallocation
Option for a Plan investor's account, the Consulting Group will use the net
asset values at the close of business on the preceding trading day. However,
the execution of trades to give effect to the changed percentages will occur on
the next trading day at the then-current net asset values.
(d) Participants in the TRAK Program will receive trade confirmations of the
reallocation transactions. In this regard, for all Plan investors other than
Section 404(c) Plan accounts (i.e., 401(k) Plan accounts), Salomon Smith Barney
will mail trade confirmations the next business day after the reallocation
trades are executed. In the case of Section 404(c) Plan participants,
notification will depend upon the notification provisions agreed to by the Plan
recordkeeper./7/\ For example, if the recordkeeper notifies Section 404(c) Plan
participants (i.e., Independent Plan Fiduciaries) in writing after each trade,
such participants will be notified of reallocation transactions in this manner.
If, however, the recordkeeper notifies Section 404(c) Plan participants of
trading activity in a quarterly statement, the reallocation activity would be
included there.
In addition to the trade confirmations which Salomon Smith Barney will provide
to all Plan investors except Section 404(c) Plans, disclosure of the
reallocation transactions will appear in the next regular client statement.
Such transactions will be reflected as a series of purchase and redemption
transactions that will shift assets among the Portfolios in accordance with the
Allocation Model as modified by the Consulting Group.
(e) If, however, the reallocation to be made in response to the Consulting
Group's recommendation exceeds an increase or decrease of more than 10 percent
in the absolute percentage allocated to any one investment medium (e.g., a
suggested increase in a 15 percent allocation to greater than 25 percent or a
decrease of such 15 percent allocation to less than 5 percent), Salomon Smith
Barney will not automatically adjust a Plan account. Under such circumstances,
Salomon Smith Barney will send out a written notice (the Notice) to the
Independent Plan Fiduciary for each affected Plan, describing the proposed
reallocation and the date on which such allocation is to be instituted (the
Effective Date).
(f) The Notice will be mailed with the presumption of delivery within three
business days to permit timely notification and adequate response time for the
Independent Plan Fiduciary. The Notice will instruct the fiduciary that he or
she will need to do nothing if such fiduciary decides to have his or her Plan
account automatically reallocated on the Effective Date. If, on the other hand,
the Independent Plan Fiduciary does not wish to follow the Consulting Group's
revised asset allocation recommendation, the Notice will instruct the
Independent Plan Fiduciary to inform a Financial Consultant, in writing, at
least 30 calendar days prior to the proposed Effective Date that the fiduciary
wishes to "opt out" of the new Allocation Model.\/8/
(g) If the Independent Plan Fiduciary "opts out," his or her Plan account will
not be changed on the Effective Date.

[Page 60395]
Under such circumstances, the Allocation Model will remain at its current level
or at such other level as the Independent Plan Fiduciary designates. However,
the Automatic Reallocation Option, will remain in effect for future changes in
such participant's Allocation Model.
(h) The Independent Plan Fiduciary will always have the ability to elect,
terminate or reinstitute the Automatic Reallocation Option or to otherwise
adjust an Allocation Model, in any way, by providing reasonably prompt notice
to a Financial Consultant. Upon request by the Independent Plan Fiduciary, the
Financial Consultant will send the appropriate form.
Salomon Smith Barney states that it is not possible to predict the frequency
of reallocations because these changes are dictated by the Consulting Group's
analysis of market conditions. However, since November 1991, Salomon Smith
Barney represents that asset allocation changes of the type that would trigger
automatic reallocations have been instituted by the Consulting Group on ten
occasions. Eight of these changes were of a magnitude of 10 percentage points
or less. The other two changes were 15 percent changes and impacted only
approximately one percent and 3 percent, respectively, of the total number of
clients participating in the TRAK Program at the time.\/9/
Salomon Smith Barney also states that the reallocation called for under the
Automatic Reallocation Option will be effected by a dollar- for-dollar
liquidation and purchase of the required amounts in the respective Plan
accounts. Because of the billing of Plan accounts participating in the TRAK
Program is leveled with respect to the compensation received by Salomon Smith
Barney and by the Financial Consultant involved in an account, Salomon Smith
Barney states that the implementation of the Automatic Reallocation Option will
be revenue-neutral. In addition, Salomon Smith Barney represents that neither
the Plan nor the participants will pay any additional fees for electing to use
the Automatic Reallocation Option./10/

- -------
/6/ Salomon Smith Barney notes that there are 12 standard Allocation Models
and that two similarly-situated Plan participants who receive the same
recommendation from the Consulting Group will receive the same reallocation.
/7/ Under these circumstances, Salomon Smith Barney will advise the
recordkeeper of the proposed reallocation of the account of a Section 404(c)
Plan participant as soon as the Consulting Group has determined that a change
to an asset allocation recommendation is going to be made. The communication
may initially be made orally because the recordkeeper must then promptly modify
its system to effect the necessary changes to a participant's account on the
effective date of the new recommendation. The oral communication is customarily
followed by a full written description of the changes within two business days
of the verbal update.
As noted above, a Section 404(c) Plan participant who has elected the
Automatic Reallocation Option would receive a trade confirmation from the
recordkeeper of the resulting changes to the positions in his or her account,
if that is the notification procedure agreed to for the Plan. Also as noted
above, transactions occurring upon automatic reallocation and the underlying
recommendation changes will be disclosed in the "Participant Quarterly Review."
- -------
/8/ The Notice will be mailed with the presumption of delivery within three
business days so that the 30 day calendar period will not commence until the
third business day following the mailing. In addition, the Effective Date of
the Automatic Reallocation Option will occur no sooner than the business day
following the thirtieth calendar day. To avoid any misunderstandings or
miscalculations by the Independent Plan Fiduciary, Salomon Smith Barney
represents that it will conspicuously state, in the Notice, the last date for
its receipt of the Independent Plan Fiduciary's written response.
- -------
/9/ While there is no minimum percentage threshold that will trigger the
Automatic Reallocation Option, other than the historical ranges specified
above, Salomon Smith Barney notes that there may be future market circumstances
that may justify an asset allocation adjustment of a lesser amount. Because the
Consulting Group will only adjust asset allocation recommendations to reflect
current market conditions, Salomon Smith Barney anticipates that triggers for
the Automatic Reallocation Option will continue to be only market-related. As
is currently the situation, Salomon Smith Barney represents that a Plan
investor may, at any time and for any reason, contact a Financial Consultant to
request a modification of an existing Allocation Model.
/10/ General Condition II(c) of PTE 94-50 as well as this proposal states that
no Plan will pay a fee or commission by reason of the acquisition or redemption
of shares in the Trust. Since the fees paid to Salomon Smith Barney are based
upon net asset values of investments and not transactions, a change of
investment allocations and the net purchases and redemptions used to effect
such changes do not change the payable fees.

B-12
<PAGE>

Thus, on the basis of the foregoing, General Condition II(f) has been revised
to read as follows:
(f) Any recommendation or evaluation made by the Consulting Group to an
Independent Plan Fiduciary will be implemented only at the express direction of
such Independent Plan Fiduciary, provided, however, that--
(1) If such Independent Plan Fiduciary shall have elected in writing (the
Election), on a form designated by Salomon Smith Barney from time to time for
such purpose, to participate in the Automatic Reallocation Option under the
TRAK Program, the affected Plan or participant account will be automatically
reallocated whenever the Consulting Group modifies the particular asset
allocation recommendation which the Independent Plan Fiduciary has chosen. Such
Election shall continue in effect until revoked or terminated by the
Independent Plan Fiduciary, in writing.
(2) Except as set forth below in paragraph II(f)(3), at the time of a change
in the Consulting Group's asset allocation recommendation, each account based
upon the asset allocation model (the Allocation Model) affected by such change
would be adjusted on the business day of the release of the new Allocation
Model by the Consulting Group, except to the extent that market conditions, and
order purchase and redemption procedures may delay such processing through a
series of purchase and redemption transactions to shift assets among the
affected Portfolios.
(3) If the change in the Consulting Group's asset allocation recommendation
exceeds an increase or decrease of more than 10 percent in the absolute
percentage allocated to any one investment medium (e.g., a suggested increase
in a 15 percent allocation to greater than 25 percent, or a decrease of such 15
percent allocation to less than 5 percent), Salomon Smith Barney will send out
a written notice (the Notice) to all Independent Plan Fiduciaries whose current
investment allocation would be affected, describing the proposed reallocation
and the date on which such allocation is to be instituted (the Effective Date).
If the Independent Plan Fiduciary notifies Salomon Smith Barney, in writing, at
least 30 calendar days prior to the proposed Effective Date that such fiduciary
does not wish to follow such revised asset allocation recommendation, the
Allocation Model will remain at the current level, or at such other level as
the Independent Plan Fiduciary then expressly designates, in writing. If the
Independent Plan Fiduciary does not affirmatively "opt out" of the new
Consulting Group recommendation, in writing, prior to the proposed Effective
Date, such new recommendation will be automatically effected by a dollar-for-
dollar liquidation and purchase of the required amounts in the respective
account.
(4) An Independent Plan Fiduciary will receive a trade confirmation of each
reallocation transaction. In this regard, for all Plan investors other than
Section 404(c) Plan accounts (i.e., 401(k) Plan accounts), Salomon Smith Barney
will mail trade confirmations on the next business day after the reallocation
trades are executed. In the case of Section 404(c) Plan participants,
notification will depend upon the notification provisions agreed to by the Plan
recordkeeper.

Notice to Interested Persons

Notice of the proposed exemption will be mailed by first class mail to the
Independent Plan Fiduciary Plan of each Plan currently participating in the
TRAK Program, or, in the case of a Section 404(c) Plan, to the recordholder of
Trust shares. Such notice will be given within 15 days of the publication of
the notice of pendency in the Federal Register. The notice will contain a copy
of the notice of proposed exemption as published in the Federal Register and a
supplemental statement, as required pursuant to 29 CFR 2570.43(b)(2). The
supplemental statement will inform interested persons of their right to comment
on and/or to request a hearing with respect to the pending exemption. Written
comments and hearing requests are due within 45 days of the publication of the
proposed exemption in the Federal Register.

General Information

The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption under section
408(a) of the Act and section 4975(c)(2) of the Code does not relieve a
fiduciary or other party in interest or disqualified person from certain other
provisions of the Act and the Code, including any prohibited transaction
provisions to which the exemption does not apply and the general fiduciary
responsibility provisions of section 404 of the Act, which require, among other
things, a fiduciary to discharge his or her duties respecting the plan solely
in the interest of the participants and beneficiaries of the plan and in a
prudent fashion in accordance with section 404(a)(1)(B) of the Act; nor does it
affect the requirements of section 401(a) of the Code that the plan operate for
the exclusive benefit of the employees of the employer maintaining the plan and
their beneficiaries;
(2) The proposed exemption, if granted, will not extend to transactions
prohibited under section 406(b)(3) of the

[Page 60396]
Act and section 4975(c)(1)(F) of the Code;
(3) Before an exemption can be granted under section 408(a) of the Act and
section 4975(c)(2) of the Code, the Department must find that the exemption is
administratively feasible, in the interest of the plan and of its participants
and beneficiaries and protective of the rights of participants and
beneficiaries of the plan;
(4) This proposed exemption, if granted, will be supplemental to, and not in
derogation of, any other provisions of the Act and the Code, including
statutory or administrative exemptions. Furthermore, the fact that a
transaction is subject to an administrative or statutory exemption is not
dispositive of whether the transaction is in fact a prohibited transaction; and
(5) This proposed exemption, if granted, is subject to the express condition
that the Summary of Facts and Representations set forth in the notice of
proposed exemption relating to PTE 92-77, as amended by PTE 94-50 and this
notice, accurately describe, where relevant, the material terms of the
transactions to be consummated pursuant to this exemption.

Written Comments and Hearing Requests

All interested persons are invited to submit written comments or requests for
a hearing on the pending exemption to the address above, within the time frame
set forth above, after the publication of this proposed exemption in the
Federal Register. All comments will be made a part of the record. Comments
received will be available for public inspection with the referenced
applications at the address set forth above.

Proposed Exemption

Based on the facts and representations set forth in the application, the
Department is considering granting the requested exemption under the authority
of section 408(a) of the Act and section 4975(c)(2) of the Code and in
accordance with the procedures set forth in 29 CFR Part 2570, Subpart B (55 FR
32836, August 10, 1990).
B-13
<PAGE>

Section I. Covered Transactions

A. If the exemption is granted, the restrictions of section 406(a) of the Act
and the sanctions resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(A) through (D) of the Code, shall not apply, to
the purchase or redemption of shares by an employee benefit plan, an individual
retirement account (the IRA), or a retirement plan for self-employed
individuals (the Keogh Plan)/11/ in the Trust for Consulting Group Capital
Market Funds (the Trust), established by Salomon Smith Barney, in connection
with such Plans' participation in the TRAK Personalized Investment Advisory
Service product (the TRAK Program).
B. If the exemption is granted, the restrictions of section 406(b) of the Act
and the sanctions resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(E) and (F) of the Code, shall not apply, to the
provision, by the Consulting Group, of (1) investment advisory services or (2)
an automatic reallocation option (the Automatic Reallocation Option) to an
independent fiduciary of a participating Plan (the Independent Plan Fiduciary),
which may result in such fiduciary's selection of a portfolio (the Portfolio)
in the TRAK Program for the investment of Plan assets.
This proposed exemption is subject to the following conditions that are set
forth below in Section II.

Section II. General Conditions

(a) The participation of Plans in the TRAK Program will be approved by an
Independent Plan Fiduciary. For purposes of this requirement, an employee,
officer or director of Salomon Smith Barney and/or its affiliates covered by an
IRA not subject to Title I of the Act will be considered an Independent Plan
Fiduciary with respect to such IRA.
(b) The total fees paid to the Consulting Group and its affiliates will
constitute no more than reasonable compensation.
(c) No Plan will pay a fee or commission by reason of the acquisition or
redemption of shares in the Trust.
(d) The terms of each purchase or redemption of Trust shares shall remain at
least as favorable to an investing Plan as those obtainable in an arm's length
transaction with an unrelated party.
(e) The Consulting Group will provide written documentation to an Independent
Plan Fiduciary of its recommendations or evaluations based upon objective
criteria.
(f) Any recommendation or evaluation made by the Consulting Group to an
Independent Plan Fiduciary will be implemented only at the express direction of
such Independent Plan Fiduciary, provided, however, that--
(1) If such Independent Plan Fiduciary shall have elected in writing (the
Election), on a form designated by Salomon Smith Barney from time to time for
such purpose, to participate in the Automatic Reallocation Option under the
TRAK Program, the affected Plan or participant account will be automatically
reallocated whenever the Consulting Group modifies the particular asset
allocation recommendation which the Independent Plan Fiduciary has chosen. Such
Election shall continue in effect until revoked or terminated by the
Independent Plan Fiduciary in writing.
(2) Except as set forth below in paragraph II(f)(3), at the time of a change
in the Consulting Group's asset allocation recommendation, each account based
upon the asset allocation model (the Allocation Model) affected by such change
would be adjusted on the business day of the release of the new Allocation
Model by the Consulting Group, except to the extent that market conditions, and
order purchase and redemption procedures may delay such processing through a
series of purchase and redemption transactions to shift assets among the
affected Portfolios.
(3) If the change in the Consulting Group's asset allocation recommendation
exceeds an increase or decrease of more than 10 percent in the absolute
percentage allocated to any one investment medium (e.g., a suggested increase
in a 15 percent allocation to greater than 25 percent, or a decrease of such 15
percent allocation to less than 5 percent), Salomon Smith Barney will send out
a written notice (the Notice) to all Independent Plan Fiduciaries whose current
investment allocation would be affected, describing the proposed reallocation
and the date on which such allocation is to be instituted (the Effective Date).
If the Independent Plan Fiduciary notifies Salomon Smith Barney, in writing, at
least 30 calendar days prior to the proposed Effective Date that such fiduciary
does not wish to follow such revised asset allocation recommendation, the
Allocation Model will remain at the current level, or at such other level as
the Independent Plan Fiduciary then expressly designates, in writing. If the
Independent Plan Fiduciary does not affirmatively "opt out" of the new
Consulting Group recommendation, in writing, prior to the proposed Effective
Date, such new recommendation will be automatically effected by a dollar-for-
dollar liquidation and purchase of the required amounts in the respective
account.
(4) An Independent Plan Fiduciary will receive a trade confirmation of each
reallocation transaction. In this regard, for all Plan investors other than
Section

[Page 60397]
404(c) Plan accounts (i.e., 401(k) Plan accounts), Salomon Smith Barney will
mail trade confirmations on the next business day after the reallocation trades
are executed. In the case of Section 404(c) Plan participants, notification
will depend upon the notification provisions agreed to by the Plan
recordkeeper.
(g) The Consulting Group will generally give investment advice in writing to
an Independent Plan Fiduciary with respect to all available Portfolios.
However, in the case of a Plan providing for participant-directed investments
(the Section 404(c) Plan), the Consulting Group will provide investment advice
that is limited to the Portfolios made available under the Plan.
(h) Any sub-adviser (the Sub-Adviser) that acts for the Trust to exercise
investment discretion over a Portfolio will be independent of Salomon Smith
Barney and its affiliates.
(i) Immediately following the acquisition by a Portfolio of any securities
that are issued by Salomon Smith Barney and/or its affiliates, the percentage
of that Portfolio's net assets invested in such securities will not exceed one
percent.
(j) The quarterly investment advisory fee that is paid by a Plan to the
Consulting Group for investment advisory services rendered to such Plan will be
offset by such amount as is necessary to assure that the Consulting Group
retains no more than 20 basis points from any Portfolio (with the exception of
the Government Money Investments Portfolio and the GIC Fund Portfolio for which
the Consulting Group and the Trust will retain no investment management fee)
which contains investments attributable to the Plan investor.
(k) With respect to its participation in the TRAK Program prior to purchasing
Trust shares,

- -------
/11/ The employee benefit plan, the IRA and the Keogh Plan are collectively
referred to herein as the Plans.

B-14
<PAGE>

(1) Each Plan will receive the following written or oral disclosures from the
Consulting Group:
(A) A copy of the Prospectus for the Trust discussing the investment
objectives of the Portfolios comprising the Trust, the policies employed to
achieve these objectives, the corporate affiliation existing between the
Consulting Group, Salomon Smith Barney and its subsidiaries and the
compensation paid to such entities./12/
(B) Upon written or oral request to Salomon Smith Barney, a Statement of
Additional Information supplementing the Prospectus which describes the types
of securities and other instruments in which the Portfolios may invest, the
investment policies and strategies that the Portfolios may utilize and certain
risks attendant to those investments, policies and strategies.
(C) A copy of the investment advisory agreement between the Consulting Group
and such Plan relating to participation in the TRAK Program and, if applicable,
informing Plan investors of the Automatic Reallocation Option.
(D) Upon written request of Salomon Smith Barney, a copy of the respective
investment advisory agreement between the Consulting Group and the Sub-
Advisers.
(E) In the case of a Section 404(c) Plan, if required by the arrangement
negotiated between the Consulting Group and the Plan, an explanation by a
Salomon Smith Barney Financial Consultant (the Financial Consultant) to
eligible participants in such Plan, of the services offered under the TRAK
Program and the operation and objectives of the Portfolios.
(F) A copy of PTE 94-50 as well as the proposed exemption and the final
exemption
pertaining to the exemptive relief described herein.
(2) If accepted as an investor in the TRAK Program, an Independent Plan
Fiduciary of an IRA or Keogh Plan, is required to acknowledge, in writing,
prior to purchasing Trust shares that such fiduciary has received copies of the
documents described above in subparagraph (k)(1) of this Section.
(3) With respect to a Section 404(c) Plan, written acknowledgement of the
receipt of such documents will be provided by the Independent Plan Fiduciary
(i.e., the Plan administrator, trustee or named fiduciary, as the recordholder
of Trust shares). Such Independent Plan Fiduciary will be required to represent
in writing to Salomon Smith Barney that such fiduciary is (a) independent of
Salomon Smith Barney and its affiliates and (b) knowledgeable with respect to
the Plan in administrative matters and funding matters related thereto, and
able to make an informed decision concerning participation in the TRAK Program.
(4) With respect to a Plan that is covered under Title I of the Act, where
investment decisions are made by a trustee, investment manager or a named
fiduciary, such Independent Plan Fiduciary is required to acknowledge, in
writing, receipt of such documents and represent to Salomon Smith Barney that
such fiduciary is (a) independent of Salomon Smith Barney and its affiliates,
(b) capable of making an independent decision regarding the investment of Plan
assets and (c) knowledgeable with respect to the Plan in administrative matters
and funding matters related thereto, and able to make an informed decision
concerning participation in the TRAK Program.
(l) Subsequent to its participation in the TRAK Program, each Plan receives
the following written or oral disclosures with respect to its ongoing
participation in the TRAK Program:
(1) The Trust's semi-annual and annual report which will include financial
statement for the Trust and investment management fees paid by each Portfolio.
(2) A written quarterly monitoring statement containing an analysis and an
evaluation of a Plan investor's account to ascertain whether the Plan's
investment objectives have been met and recommending, if required, changes in
Portfolio allocations.
(3) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly, detailed investment performance monitoring
report, in writing, provided to an Independent Plan Fiduciary of such Plan
showing, Plan level asset allocations,
Plan cash flow analysis and annualized risk adjusted rates of return for Plan
investments. In addition, if required by such arrangement, Financial
Consultants will meet periodically with Independent Plan Fiduciaries of Section
404(c) Plans to discuss the report as well as with eligible participants to
review their accounts' performance.
(4) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly participant performance monitoring report
provided to a Plan participant which accompanies the participant's benefit
statement and describes the investment performance of the Portfolios, the
investment performance of the participant's individual investment in the TRAK
Program, and gives market commentary and toll-free numbers that will enable the
participant to obtain more information about the TRAK Program or to amend his
or her investment allocations.
(5) On a quarterly and annual basis, written disclosures to all Plans of the
(a) percentage of each Portfolio's brokerage commissions that are paid to
Salomon Smith Barney and its affiliates and (b)

[Page 60398]
the average brokerage commission per share paid by each Portfolio to Salomon
Smith Barney and its affiliates, as compared to the average brokerage
commission per share paid by the Trust to brokers other than Salomon Smith
Barney and its affiliates, both expressed as cents per share.
(m) Salomon Smith Barney shall maintain, for a period of six years, the
records necessary to enable the persons described in paragraph (n) of this
Section to determine whether the conditions of this exemption have been met,
except that (1) a prohibited transaction will not be considered to have
occurred if, due to circumstances beyond the control of Salomon Smith Barney
and/or its affiliates, the records are lost or destroyed prior to the end of
the six year period, and (2) no party in interest other than Salomon Smith
Barney shall be subject to the civil penalty that may be assessed under section
502(i) of the Act, or to the taxes imposed by section 4975(a) and (b) of the
Code, if the records are not maintained, or are not available for examination
as required by paragraph (n) below.
(n)(1) Except as provided in section (2) of this paragraph and notwithstanding
any provisions of subsections (a)(2) and (b) of section 504 of the Act, the
records referred to in paragraph (m) of this Section II shall be
unconditionally available at their customary location during normal business
hours by:
(A) Any duly authorized employee or representative of the Department or the
Service;
(B) Any fiduciary of a participating Plan or any duly authorized
representative of such fiduciary;

- -------
/12/ The fact that certain transactions and fee arrangements are the subject
of an administrative exemption does not relieve the Independent Plan Fiduciary
from the general fiduciary responsibility provisions of section 404 of the Act.
In this regard, the Department expects the Independent Plan Fiduciary to
consider carefully the totality of fees and expenses to be paid by the Plan,
including the fees paid directly to Salomon Smith Barney or to other third
parties and/or indirectly through the Trust to Smith Barney.
B-15
<PAGE>

(C) Any contributing employer to any participating Plan or any duly authorized
employee representative of such employer; and
(D) Any participant or beneficiary of any participating Plan, or any duly
authorized representative of such participant or beneficiary.
(2) None of the persons described above in subparagraphs (B)-(D) of this
paragraph (n) shall be authorized to examine the trade secrets of Salomon Smith
Barney or commercial or financial information which is privileged or
confidential.

Section III. Definitions

For purposes of this proposed exemption:
(a) The term "Salomon Smith Barney" means Salomon Smith Barney Inc. and any
affiliate of Salomon Smith Barney, as defined in paragraph (b) of this Section
III.
(b) An "affiliate" of Salomon Smith Barney includes--
(1) Any person directly or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with Salomon Smith Barney.
(For purposes of this subsection, the term "control" means the power to
exercise a controlling influence over the management or policies of a person
other than an individual.)
(2) Any officer, director or partner in such person, and
(3) Any corporation or partnership of which such person is an officer,
director or a 5 percent partner or owner.
(c) An "Independent Plan Fiduciary" is a Plan fiduciary which is independent
of Salomon Smith Barney and its affiliates and is either--
(1) A Plan administrator, sponsor, trustee or named fiduciary, as the
recordholder of Trust shares under a Section 404(c) Plan;
(2) A participant in a Keogh Plan;
(3) An individual covered under a self-directed IRA which invests in Trust
shares;
(4) A trustee, investment manager or named fiduciary responsible for
investment decisions in the case of a Title I Plan that does not permit
individual direction as contemplated by Section 404(c) of the Act; or
(5) A participant in a Plan, such as a Section 404(c) Plan, who is permitted
under the terms of such Plan to direct, and who elects to direct the investment
of assets of his or her account in such Plan.

Section IV. Effective Dates

If granted, this proposed exemption will be effective as of June 21, 1994 with
respect to the transactions described in Section I.A. and B.(1). With respect
to Section I.B.(2) and Section II(f)(1)-(4) of the General Conditions, this
proposed exemption will be effective November 9, 1998.
The availability of this proposed exemption is subject to the express
condition that the material facts and representations contained in the
application for exemption are true and complete and accurately describe all
material terms of the transactions. In the case of continuing transactions, if
any of the material facts or representations described in the applications
change, the exemption will cease to apply as of the date of such change. In the
event of any such change, an application for a new exemption must be made to
the Department.
For a more complete statement of the facts and representations supporting the
Department's decision to grant PTEs 92-77 and PTE 94-50, refer to the proposed
exemptions and the grant notices which are cited above.

Signed at Washington, D.C., this 4th day of November, 1998.

Ivan L. Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.

[FR Doc. 98-29964 Filed 11-6-98; 8:45 am]

BILLING CODE 4510-29-P

B-16
<PAGE>

Federal Register: April 5, 1999 (Volume 64, Number 64)
Notices
Page 16486-16493
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05ap99-118]
- --------------------------------------------------------------------------------
DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 99-15; Exemption Application No. D-10574]

Grant of Individual Exemption To Amend Prohibited Transaction

Exemption (PTE) 94-50 Involving Salomon Smith Barney Inc.

Salomon Smith Barney Located in New York, NY

AGENCY: Pension and Welfare Benefits Administration, U.S. Department of Labor.

ACTION: Grant of individual exemption to modify PTE 94-50.

- --------------------------------------------------------------------------------

SUMMARY: This document contains a final exemption before the Department of
Labor (the Department) which would amend PTE 94-50 (59 FR 32024, June 21,
1994), an exemption granted to Smith Barney, Inc. (Smith Barney), the
predecessor of Salomon Smith Barney. PTE 94-50 relates to the operation of the
TRAK Personalized Investment Advisory Service product (the TRAK Program) and
the Trust for TRAK Investments (subsequently renamed the Trust for Consulting
Group Capital Markets Funds) (the Trust). These transactions are described in a
notice of pendency that was published in the Federal Register on November 9,
1998 at 63 FR 60391.

EFFECTIVE DATE: This exemption is effective as of July 31, 1993 with respect to
the transactions described in Section I.A. and B.(1). of this grant notice. It
is also effective as of March 29, 1994 for transactions involving a daily-
traded collective investment fund (the GIC Fund) that was added to the TRAK
Program pursuant to PTE 94-50. With respect to Section I.B(2) and Section
II(f)(1)-(4) of the General Conditions of this grant notice, which set forth
the amendments to PTE 94-50, this exemption is effective as of November 9,
1998.

SUPPLEMENTARY INFORMATION: On November 9, 1998, the Department published, at 63
FR 60391, a notice of proposed exemption in the Federal Register that would
amend PTE 94-50. PTE 94-50 provides an exemption from certain prohibited
transaction restrictions of section 406 of the Employee Retirement Income
Security Act of 1974 (the Act) and from the sanctions resulting from the
application of section 4975 of the Internal Revenue Code of 1986 (the Code), as
amended, by reason of section 4975(c)(1) of the Code. Specifically, PTE 94-50
provides exemptive relief from the restrictions of section 406(a) of the Act
and the sanctions resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(A) through (D) of the Code, for the purchase or
redemption of shares in the Trust by an employee benefit plan, an individual
retirement account, or a retirement plan for a self-employed individual
(collectively, the Plans). PTE 94-50 also provides exemptive relief from the
restrictions of section 406(b) of the Act and the sanctions resulting from the
application of section 4975 of the Code, by reason of section 4975(c)(1)(E) and
(F) of the Code, with respect to the provision, by the Consulting Group of
Smith Barney (the Consulting Group), of investment advisory services to
independent fiduciaries of participating Plans (the Independent Plan
Fiduciaries) that might result in such fiduciary's selection of an investment
portfolio under the TRAK Program for the investment of Plan assets.

Besides the transactions described above, PTE 94-50 permitted Smith Barney to
add a daily-traded collective investment fund (i.e., the GIC Fund) to the
existing Fund Portfolios and to describe the various entities operating the GIC
Fund. Further, PTE 94-50 replaced references to Shearson Lehman with references
to Smith Barney. PTE 94-50 is effective as of July 31, 1993 for the
transactions described in PTE 92- 77 and effective as of March 29, 1994 with
respect to transactions involving the GIC Fund.

Salomon Smith Barney has informed the Department of certain changes to the
facts underlying PTE 94-50. These modifications include (1) Corporate mergers
that have changed the names of the parties described in PTE 94-50 and would
permit broader distribution of TRAK-related products, (2) the implementation of
a recordkeeping reimbursement offset system (the Recordkeeping Reimbursement
Offset Procedure) under the TRAK Program, and (3) the institution of an
automated reallocation option (the Automatic Reallocation Option) under the
TRAK Program for which Salomon Smith Barney has requested administrative
exemptive relief from the Department. The proposed exemption was requested in
an application filed on behalf of Salomon Smith Barney pursuant to section
408(a) of the Act and section 4975(c)(2) of the Code, and in accordance with
the procedures (the Procedures) set forth in 29 CFR Part 2570, Subpart B (55 FR
32836, August 10, 1990). Effective December 31, 1978, section 102 of
Reorganization Plan No. 4 of 1978 (43 FR 47713, October 17, 1978) transferred
the authority of the Secretary of the Treasury to issue exemptions of the type
requested to the Secretary of Labor. Accordingly, this exemption is being
issued solely by the Department.

The proposed exemption gave interested persons an opportunity to comment on
the notice of pendency and to request a public hearing. During the comment
period, the Department received three written comments and no requests for a
hearing in response to the notice. Two comments were submitted by Plan
participants investing in the TRAK Program. The third comment, which is
intended to clarify and

[[Page 16487]]

modify the proposed exemption, was submitted by Salomon Smith Barney.

Following is a discussion of the comments received, the responses provided by
Salomon Smith Barney, and the Department's determinations regarding the
comments.

Participant Comments

The first commenter objects to the proposed exemption because he is under the
impression that the new services that will be
- -------
/1/ On October 5, 1992, the Department granted PTE 92-77 at 55 FR 45833. PTE
92-77 permitted Shearson Lehman Brothers, Inc. (Shearson Lehman) to make the
TRAK Program available to Plans that acquired shares in the Trust. In this
regard, PTE 92-77 permitted Plans to purchase or redeem shares in the Trust and
allowed the Consulting Group to provide investment advisory services to an
Independent Fiduciary of a Plan which might result in such fiduciary's
selection of a Portfolio in the TRAK Program for the investment of Plan assets.
- -------
Subsequent to the granting of PTE 92-77, on July 31, 1993, Smith Barney
acquired certain assets of Shearson Lehman associated with its retail business,
including the TRAK Program, and applied for and received a new exemption (PTE
94-50) for the ongoing operation of the TRAK Program. Essentially, PTE 94-50
amended and replaced PTE 92-77. However, because of certain material factual
changes to the representations supporting PTE 92-77, the Department determined
that the exemption was no longer effective for use by Smith Barney and its
subsidiaries as of the date of the asset sale.

B-17
<PAGE>

offered to TRAK Program investors by Salomon Smith Barney will result in
increased fees paid to consultants and investment advisers by the Funds. The
commenter also does not believe that there will be a corresponding increase in
the growth of the Funds.

Salomon Smith Barney represents that although it is not clear which provisions
in the proposed exemption have elicted the comment, it points out that the
comment relates more or less to the underlying Fund portfolios rather than to
the TRAK Program.

As to the commenter's first area of concern, Salomon Smith Barney explains
that the proposed Automatic Reallocation Option is a service that is to be
provided at no additional cost to the investor and it does not affect the
calculation of the investment advisory fee. In addition, Salomon Smith Barney
represents that it does not have a basis to respond to the inclusion of
"consultants" in this comment. With respect to the commenter's concern about
growth prospects, Salomon Smith Barney states that no investment vehicle can
assure investors future performance.

The second commenter states that while he has no objection to Salomon Smith
Barney's implementation of the Automatic Reallocation Option, he would like to
see the requirement for clear explanations of the choices and the implications
of such choices. The commenter also suggests that Salomon Smith Barney provide
a clear path for revocation of the Automatic Reallocation Option, whereby a
Plan investor's choice would have to be reaffirmed periodically.

In response to this comment, Salomon Smith Barney states that the text of the
announcement referred to in the preamble (the Preamble) at 60394 provides
participants with the same information that the commenter requests. However, as
an alternative to the commenter's suggestion of a reaffirmation mechanism,
Salomon Smith Barney represents that it will include a footnote in the
"Participant Quarterly Review" indicating that the participant is currently
using the Automatic Reallocation Option and stating that such participant can
cancel this service at any time. Salomon Smith Barney proposes to place the
footnote after the legend quoted in Footnote 5 of the Preamble. The additional
language would read as follows:

You have elected to have your TRAK Portfolio automatically reallocated at such
time as the Consulting Group recommends a change to the Allocation Model you
are following. If, at any time, you choose to discontinue this service, please
contact your Financial Consultant for instructions.

Salomon Smith Barney believes the participant will then be consistently
reminded of his or her option to discontinue the Automatic Reallocation Option.

Salomon Smith Barney's Comments

1. Corporate Mergers

Salomon Smith Barney wishes to clarify that on page 60392 of the Preamble, in
the first sentence of the paragraph captioned "Corporate Mergers," the phrase
"Salomon Inc., the ultimate parent of" should be inserted after the phrase
"acquired all the shares of." Also, in this section, Salomon Smith Barney
wishes to modify the first sentence of the third paragraph to clarify that one
of the purposes of the merger, rather than the "sole" purpose of the merger,
was to create additional distribution channels for the TRAK Program.

In response to this comment, the Department concurs with the requested
modifications and has made the suggested changes.

2. Recordkeeping Reimbursement Offset Procedure

Salomon Smith Barney has informed the Department that although it has not yet
implemented the Recordkeeping Reimbursement Offset Procedure in a manner that
will reduce the net outside fee (the Net Outside Fee), at the present time, it
has in place a recordkeeping reimbursement program that reduces recordkeeping
expenses only, at an annual rate of $8.50 per participant position. Salomon
Smith Barney states that this annualized rate has been approved by the Funds'
Board of Trustees and that, of the $8.50 amount, $0.50 per participant position
represents a sub-transfer agency fee for the costs associated with the
application of the reimbursement process (the Processing Fee). Currently,
Salomon Smith Barney states that its affiliate, Smith Barney Corporate Trust
Company, is retaining this Processing Fee.

Salomon Smith Barney has provided an example showing the manner in which the
recordkeeping reimbursement amount is determined by the Funds at the $8.50
level using some of the numbers set forth in the example given in the Preamble
on pages 60392 and 60393. The example assumes that all positions are eligible
for reimbursement because positions in the Government Money Investments
Portfolio and the Stable Value (GIC) Fund Portfolio are not eligible for
recordkeeping reimbursement.

Assume that Plan A has $1 million in assets invested in the TRAK Program and
100 participants. Assume further that Plan A pays its recordkeeper $20 per
participant per year in Annual Fees totaling $2,000 per year or $500 per
quarter and $12 per participant per year in Other Fees, totaling $1,200 per
year or $300 per quarter. Assume also that the Plan pays the recordkeeper an
annual Processing Fee of $150.

At the end of each calendar quarter, Plan A's recordkeeper would determine the
actual number of Fund positions held by the Plan A participants and calculate
the resulting reimbursement amount that would be paid by the Funds. If Plan A
had 300 participant positions at the end of the quarter, the Plan's total
recordkeeping reimbursement amount to be paid by the Funds would be 300 x $2
(the annual amount of $8 divided by 4) or $600.

The Processing Fee paid by the Plan to the recordkeeper for the quarter would
be 300 x $0.125 (the annual amount of $0.50 divided by 4) or $37.50. This
Processing Fee would, in turn, also be credited back to the Plan by the Funds.

Application of Reimbursement to Recordkeeping Fees

<TABLE>
<S> <C>
Quarterly Portion of Annual Fees..................................... $ 500.00
Quarterly Portion of Other Fees/2................................./.. 300.00
Processing Fee....................................................... 37.50
--------
Total Quarterly Recordkeeping Fees................................... $ 837.50
Credit for Reimbursement............................................. $(600.00)
Credit for Processing Fee............................................ $ (37.50)
--------
Total Reimbursement............................................... $(637.50)
Net Amount of Recordkeeping Fees Payable by the Plan................. $ 200.00
Net Amount of Recordkeeping Fees Payable by the Funds................ 637.50
--------
Total Quarterly Recordkeeping Fees................................ $ 837.50
</TABLE>

Since the recordkeeping reimbursement program currently in place applies only
to the payment of expenses related to recordkeeping, there would never be an
"excess reimbursement" according to Salomon Smith Barney. Therefore, the Total
Reimbursement amount would reflect the lesser of the amount calculated as in
the example above, or the actual

[[Page 16488]]

costs billed. If the Total Reimbursement
- -------

/2/ Assumes "Other Fees" are paid by the Plan during the quarter.

B-18
<PAGE>

calculation had exceeded the Total Quarterly Recordkeeping Fees, Salomon Smith
Barney states that the maximum reimbursement amount would be limited to the
Total Quarterly Recordkeeping Fees.

On page 60392 of the Preamble, the second paragraph of the section describing
the Recordkeeping Reimbursement Offset Procedure states that in May 1998, the
Board of Trustees of the Funds approved a recordkeeping reimbursement amount of
$12.50 for each investment position held by a participant. Salomon Smith Barney
notes that the recordkeeping reimbursement amount may be changed by the Board
of Trustees of the Funds from time to time. Therefore, it requests that the
description of the TRAK Program define the reimbursement amount as "such annual
dollar amount per eligible position as shall be set by the Board of Trustees of
the Funds from time to time." Salomon Smith Barney has also informed the
Department that, of the $12.50 annual reimbursement amount approved by the
Board of Trustees of the Funds, $0.50 is being retained by Smith Barney
Corporate Trust Company as a Processing Fee.

The Department does not object to making the foregoing clarifications to the
description of the Recordkeeping Reimbursement Offset Procedure in the
Preamble. However, because Smith Barney Corporate Trust Company is retaining
$0.50 per participant position as a Processing Fee, the Department requested
that Salomon Smith Barney revise the calculations in the example appearing on
pages 60392 and 60393 of the Preamble. In addition to these changes, Salomon
Smith Barney suggested that the following disclaimer language preface the
example in order to avoid investor confusion:

Salomon Smith Barney has provided the following numbers solely for ease of
calculation and not as typical or representative of the operation of the TRAK
product in any particular client circumstance.

Moreover, Salomon Smith Barney notes that because a Plan participating in the
TRAK Program may be required to pay a recordkeeper "Other Fees" in addition to
annual recordkeeping fees, both of which may be billed on a quarterly basis, it
wishes to clarify that "Other Fees" may arise only at certain times of the year
and that it does not wish to imply by the example that "Other Fees" are
regularly billed quarterly in all instances.

In light of these changes, the revised example is set forth as follows:

Salomon Smith Barney has provided the following numbers solely for ease of
calculation and not as typical or representative of the operation of the TRAK
product in any particular client circumstance. Therefore, the Recordkeeping
Reimbursement Offset Procedure would work as follows:

At the end of each calendar quarter, Plan A's recordkeeper would determine the
actual number of Fund positions held by the Plan A participants and calculate
the resulting reimbursement amount. If Plan A had 300 participant positions at
the end of the quarter, the Plan's total recordkeeping reimbursement amount
would be 300 x $3 (the annual amount of $12 divided by 4) or $900. In addition,
the Processing Fee paid to the recordkeeper for the quarter would be 300 x
$0.125 (the annual amount of $0.50 divided by 4) or $37.50.

At the end of each calendar quarter, Plan A's recordkeeper would determine the
actual number of Fund positions held by the Plan A participants and calculate
the resulting reimbursement amounts to be paid by the Funds. If Plan A had 300
participant positions at the end of the quarter, the Plan's total recordkeeping
reimbursement amount would be 300 x $3 (the annual amount of $12 divided by 4)
or $900. To this amount would be added the $37.50 Processing Fee paid to the
recordkeeper during the quarter. Such amounts would be credited as follows:

Application of Reimbursement to Recordkeeping Fees
<TABLE>
<S> <C>
Quarterly Portion of Annual Fees/3/ ................................. $ 500.00
Quarterly Portion of Other Fees...................................... 300.00
Processing Fee....................................................... 37.50
Total Quarterly Recordkeeping Fees................................... $ 837.50
Credit for Reimbursement............................................. $(900.00)
Credit for Processing Fee............................................ (37.50)
--------
Total Reimbursement............................................... $(937.50)
--------
Excess Reimbursement................................................. $(100.00)
</TABLE>

Because the Total Reimbursement amount exceeds the Total Quarterly
Recordkeeping Fees, the Plan does not owe any recordkeeping fees for that
period. Therefore, the recordkeeper would not bill the Plan. Instead, the Funds
would pay the recordkeeper the $837.50 amount due.

Application of Excess Reimbursement to the Net Outside Fee

<TABLE>
<S> <C>
Quarterly Net Outside Fee............................................ $2,125.00
Excess Reimbursement................................................. (100.00)
Net Outside Fee Paid by the Plan..................................... $2,025.00
Net Outside Fee Paid by the Funds.................................... 100.00
---------
Total Quarterly Net Outside Fee................................... $2,125.00
---------
</TABLE>
In the program as proposed, the Funds have agreed that any Excess
Reimbursement amount remaining after the payment of the Total Quarterly
Recordkeeping Fees would be paid by the Funds to reduce the Plan's investment
advisory fee obligations. Therefore, the $100 Excess Reimbursement amount would
be applied against the Plan's Quarterly Net Outside Fee. Under such
circumstances, the recordkeeper would advise the Consulting Group that it is
entitled to bill the Plan for the $2,025.00 balance of the Consulting Group's
Net Outside Fee. In turn, the Funds would pay the $100 amount attributable to
the Excess Reimbursement to the Consulting Group./4/

Also, on page 60392 of the Preamble, in the second paragraph of the section
describing the Recordkeeping Reimbursement Offset Procedure, it states that a
participant holding positions in three different Funds would be eligible to
receive a total annual reimbursement of $37.50. In light of the change to the
allocation of the $12.50 reimbursement amount (i.e., $12.00 per participant
position and $0.50 payable to Smith Barney Corporate Trust Company as a
Processing Fee), Salomon Smith Barney wishes to clarify that the participant
would receive a "total annual offset of $36.00" rather than a "total annual
reimbursement of $37.50."

Finally, on page 60392 of the Preamble, in the last sentence of the second
paragraph describing the Recordkeeping Reimbursement Offset Procedure, it
states that an affected Plan will be required to pay only the balance of the
[Net Outside] fee, which is generally charged on a quarterly
- -------
/3/ Assumes "Other Fees" are paid by the Plan during the quarter.
- -------
/4/ It should be noted that the existence or the amount of the excess will not
alter the amount of the recordkeeping or advisory fees. Instead, the
reimbursement calculations will determine the proportion of payment by the
Funds of the Plan's fee obligations.

B-19
<PAGE>

basis, after the excess reimbursement amount has been deducted. Salomon Smith
Barney wishes to point out that because some recordkeepers choose to bill the
initial quarterly installment of the recordkeeping fee in full and then apply
the recordkeeping reimbursement amount for each quarter to the next quarter's

[[Page 16489]]

fees, it suggests that the Department delete the clause stating "and the timing
of the offset of the excess reimbursement amount against the fees," appearing
on page 60393 of the Preamble in the second sentence of the first full
paragraph following the example. The Department concurs with the modifications
to the Preamble.

3. Footnote 3

On page 60392 of the Preamble, Footnote 3 states that Salomon Smith Barney is
offsetting, quarterly, against the Outside Fee, such amount as is necessary to
assure that the Consulting Group retains not more than 20 basis points (as an
Inside Fee) from any Portfolio on investment assets attributable to any Plan.
For purposes of clarification, Salomon Smith Barney requests that the
Department add the following parenthetical exception at the end of the footnote
after the word "Plan":

(except the Government Money Investments Portfolio and the Stable Value (GIC)
Fund Portfolio, as to which no investment management fee is retained).

In response, the Department concurs with this clarification. On page 60393 of
the Preamble, the second sentence of the first paragraph following the example
states that 23 recordkeepers currently provide services to TRAK Program
investors. Salomon Smith Barney explains that since a Plan designates its own
recordkeeper, the number "23" is subject to change. Therefore, Salomon Smith
Barney suggests the deletion of this number and the Department concurs with
this clarification.

4. Investor Contact/Superfluous Language

On page 60393 of the Preamble, Footnote 5 distinguishes the Automatic
Reallocation Option from rebalancing of a participant's account and it
instructs a TRAK Program participant to contact his or her Financial Consultant
should a change in an investment allocation be warranted. Footnote 5 also
states that a Financial Consultant is expected to initiate contact with Plan
participants at least annually to encourage a comparison of the holdings in the
Plan participant's portfolio against the Consulting Group's recommendation.
Salomon Smith Barney wishes to inform the Department that in the case of
retirement plans covering multiple participants, this contact typically may
take the form of regular written communications between the Financial
Consultant and the Plan investor.

Moreover, the Department has stricken the last two sentences of Footnote 5,
which due to a printing error, contain superfluous language also appearing on
page 60393 of the Preamble, in the second and third sentences of the first
paragraph under the description of the Automatic Reallocation Option.

5. Footnote 6

On page 60394 of the Preamble, Footnote 6 states, in pertinent part, that
there are 12 standard asset allocation models (the Allocation Models). Salomon
Smith Barney explains that because it is constantly in the process of refining
the basis for its asset allocation advice, the number of standard Allocation
Models is expected to change as a result of such product modifications. To
avoid an ongoing obligation to alter this number, Salomon Smith Barney suggests
that the reference to the number "12" be deleted. Therefore, the Department has
modified the Preamble, accordingly.

6. Condition (f)

On page 60395 of the Preamble and page 60396 of the operative language of the
proposed exemption, Section II(f)(3) of the General Conditions contains a
notice provision that requires an Independent Plan Fiduciary to give Salomon
Smith Barney at least 30 calendar days prior written notice of its intention to
"opt out" of a new asset allocation model. Salomon Smith Barney wishes to
clarify that an Independent Plan Fiduciary has a period of at least 30 calendar
days during which to provide Salomon Smith Barney with written notice.
Therefore, Salomon Smith Barney proposes that the notice period be described as
"at any time within the period of 30 calendar days" prior to the Effective
Date.

In response to this comment, the Department has made the change suggested by
Salomon Smith Barney.

7. Deletion of the Last Sentence of Paragraph (g)

On pages 60394 and 60395 of the Preamble, paragraph (g) states that if the
Independent Plan Fiduciary "opts out," his or her Plan account will not be
changed on the Effective Date. Paragraph (g) also states that, under such
circumstances, the Allocation Model will remain at its current level or at such
other level as the Independent Plan Fiduciary designates. However, the
Automatic Reallocation Option will remain in effect for future changes in such
participant's Allocation Model.

Salomon Smith Barney explains that once a participant has opted out of the
Automatic Reallocation Option, the participant's account is left at its current
"non-conforming" allocation levels and it no longer resembles a Consulting
Group Allocation Model. Because the Automatic Reallocation Option, in effect,
terminates upon a participant's "opting out," Salomon Smith Barney requests the
deletion of the last sentence of paragraph (g).

In response to this comment, the Department has made the requested deletion to
paragraph (g).

8. General Information

On page 60395 of the proposed exemption, in the section captioned "General
Information," paragraph (2) states that the proposed exemption, if granted,
will not extend to transactions prohibited under section 406(b)(3) of the Act
and section 4975(c)(1)(F) of the Code. The Department wishes to point out that
the exemption will extend to transactions that are prohibited under section
406(b) of the Act and section 4975(c)(1)(E) and (F) of the Code and it has
modified the final exemption, accordingly.

9. Scope of the Term "Employee Benefit Plans"

Salomon Smith Barney requests that the exemption cover transactions in the
TRAK Program that are entered into not only by qualified plans that meet the
requirements of section 401(k) of the Code, but also by any individual account
pension plan that may be subject to Title I of the Act and established under
section 403(b) of the Code (the Section 403(b) Plan). To the extent that
participants in Section 403(b) Plans invest their contributions in shares of
the Funds, Salomon Smith Barney and its affiliates would like to make the TRAK
Program available to them.

The Department concurs with this comment and, on page 60396 of the proposed
exemption, it has revised Section I.A. of the operative language by deleting
the word "or" preceding the phrase "a retirement plan for self-employed
individuals (the Keogh Plan)" and adding
B-20
<PAGE>

the phrase "or an individual account pension plan that is subject to the
provisions of Title I of the Act and established under section 403(b) of the
Code (the Section 403(b) Plan)." In addition, the Department has revised
Footnote 11 of the proposed exemption to include a reference to the term
"Section 403(b) Plan" after the term "Keogh Plan." Further, on page 60398 of
the proposed exemption, the Department has

[[Page 16490]]

revised Section III(c)(3) of the Definitions as follows:

(3) An individual covered under (i) a self-directed IRA or (ii) a Section
403(b) Plan, which invests in Trust shares.

For further information regarding the comments or other matters discussed
herein, interested persons are encouraged to obtain copies of the exemption
application file (Exemption Application No. D-10574) the Department is
maintaining in this case. The complete application file, as well as all
supplemental submissions received by the Department are made available for
public inspection in the Public Documents Room of the Pension and Welfare
Benefits Administration, Room N-5638, U.S. Department of Labor, 200
Constitution Avenue, N.W., Washington, D.C. 20210.

Accordingly, after giving full consideration to the entire record, including
the written comments received, the Department has decided to grant the
exemption subject to the modifications and clarifications described above.

General Information

The attention of interested persons is directed to the following:

(1) The fact that a transaction is the subject of an exemption under section
408(a) of the Act and section 4975(c)(2) of the Code does not relieve a
fiduciary or other party in interest or disqualified person from certain other
provisions of the Act and the Code, including any prohibited transaction
provisions to which the exemption does not apply and the general fiduciary
responsibility provisions of section 404 of the Act, which require, among other
things, a fiduciary to discharge his or her duties respecting the plan solely
in the interest of the participants and beneficiaries of the plan and in a
prudent fashion in accordance with section 404(a)(1)(B) of the Act; nor does it
affect the requirements of section 401(a) of the Code that the plan operate for
the exclusive benefit of the employees of the employer maintaining the plan and
their beneficiaries;

(2) The exemption will extend to transactions prohibited under section
406(b)(3) of the Act and section 4975(c)(1)(F) of the Code;

(3) In accordance with section 408(a) of the Act and section 4975(c)(2) of the
Code, and the Procedures cited above, and based upon the entire record, the
Department finds that the exemption is administratively feasible, in the
interest of the plan and of its participants and beneficiaries and protective
of the rights of participants and beneficiaries of the plan;

(4) The exemption will be supplemental to, and not in derogation of, any other
provisions of the Act and the Code, including statutory or administrative
exemptions. Furthermore, the fact that a transaction is subject to an
administrative or statutory exemption is not dispositive of whether the
transaction is in fact a prohibited transaction; and

(5) This is subject to the express condition that the Summary of Facts and
Representations set forth in the notice of proposed exemption relating to PTE
92-77, as amended by PTE 94-50 and this notice, accurately describe, where
relevant, the material terms of the transactions to be consummated pursuant to
this exemption.

Exemption

Under the authority of section 408(a) of the Act and section 4975(c)(2) of the
Code and in accordance with the Procedures set forth above, the Department
hereby amends PTE 94-50 as follows:

Section I. Covered Transactions

A. The restrictions of section 406(a) of the Act and the sanctions resulting
from the application of section 4975 of the Code, by reason of section
4975(c)(1) (A) through (D) of the Code, shall not apply, to the purchase or
redemption of shares by an employee benefit plan, an individual retirement
account (the IRA), a retirement plan for self- employed individuals (the Keogh
Plan), or an individual account pension plan that is subject to the provisions
of Title I of the Act and established under section 403(b) of the Code (the
Section 403(b) Plan)/5/ in the Trust for Consulting Group Capital Market Funds
(the Trust), established by Salomon Smith Barney, in connection with such
Plans' participation in the TRAK Personalized Investment Advisory Service
product (the TRAK Program).

B. The restrictions of section 406(b) of the Act and the sanctions resulting
from the application of section 4975 of the Code, by reason of section
4975(c)(1) (E) and (F) of the Code, shall not apply, to the provision, by the
Consulting Group, of (1) investment advisory services or (2) an automatic
reallocation option (the Automatic Reallocation Option) to an independent
fiduciary of a participating Plan (the Independent Plan Fiduciary), which may
result in such fiduciary's selection of a portfolio (the Portfolio) in the TRAK
Program for the investment of Plan assets.

This exemption is subject to the following conditions that are set forth below
in Section II.

Section II. General Conditions

(b) The total fees paid to the Consulting Group and its affiliates will
constitute no more than reasonable compensation.

(d) The terms of each purchase or redemption of Trust shares shall remain at
least as favorable to an investing Plan as those obtainable in an arm's length
transaction with an unrelated party.

(e) The Consulting Group will provide written documentation to an Independent
Plan Fiduciary of its recommendations or evaluations based upon objective
criteria.

(f) Any recommendation or evaluation made by the Consulting Group to an
Independent Plan Fiduciary will be implemented only at the express direction of
such Independent Plan Fiduciary, provided, however, that--

(1) If such Independent Plan Fiduciary shall have elected in writing (the
Election), on a form designated by Salomon Smith Barney from time to time for
such purpose, to participate in the Automatic Reallocation Option under the
TRAK Program, the affected Plan or participant account will be
- -------
/5/ The employee benefit plan, the IRA, the Keogh Plan and the Section 403(b)
Plan are collectively referred to herein as the Plans.

B-21
<PAGE>

automatically reallocated whenever the Consulting Group modifies the particular
asset allocation recommendation which the Independent Plan Fiduciary has
chosen. Such Election shall continue in effect until revoked or terminated by
the Independent Plan Fiduciary in writing.

(2) Except as set forth below in paragraph II(f)(3), at the time of a change
in the Consulting Group's asset allocation recommendation, each account based
upon the asset allocation model (the Allocation Model) affected by such change
would be adjusted on the business day of the release of the new Allocation
Model by the Consulting Group, except to the extent that market conditions, and
order purchase and

[[Page 16491]]

redemption procedures may delay such processing through a series of purchase
and redemption transactions to shift assets among the affected Portfolios.

(3) If the change in the Consulting Group's asset allocation recommendation
exceeds an increase or decrease of more than 10 percent in the absolute
percentage allocated to any one investment medium (e.g., a suggested increase
in a 15 percent allocation to greater than 25 percent, or a decrease of such 15
percent allocation to less than 5 percent), Salomon Smith Barney will send out
a written notice (the Notice) to all Independent Plan Fiduciaries whose current
investment allocation would be affected, describing the proposed reallocation
and the date on which such allocation is to be instituted (the Effective Date).
If the Independent Plan Fiduciary notifies Salomon Smith Barney, in writing, at
any time within the period of 30 calendar days prior to the proposed Effective
Date that such fiduciary does not wish to follow such revised asset allocation
recommendation, the Allocation Model will remain at the current level, or at
such other level as the Independent Plan Fiduciary then expressly designates,
in writing. If the Independent Plan Fiduciary does not affirmatively "opt out"
of the new Consulting Group recommendation, in writing, prior to the proposed
Effective Date, such new recommendation will be automatically effected by a
dollar-for-dollar liquidation and purchase of the required amounts in the
respective account.

(4) An Independent Plan Fiduciary will receive a trade confirmation of each
reallocation transaction. In this regard, for all Plan investors other than
Section 404(c) Plan accounts (i.e., 401(k) Plan accounts), Salomon Smith Barney
will mail trade confirmations on the next business day after the reallocation
trades are executed. In the case of Section 404(c) Plan participants,
notification will depend upon the notification provisions agreed to by the Plan
recordkeeper.

(g) The Consulting Group will generally give investment advice in writing to
an Independent Plan Fiduciary with respect to all available Portfolios.
However, in the case of a Plan providing for participant-directed investments
(the Section 404(c) Plan), the Consulting Group will provide investment advice
that is limited to the Portfolios made available under the Plan.

(h) Any sub-adviser (the Sub-Adviser) that acts for the Trust to exercise
investment discretion over a Portfolio will be independent of Salomon Smith
Barney and its affiliates.

(i) Immediately following the acquisition by a Portfolio of any securities
that are issued by Salomon Smith Barney and/or its affiliates, the percentage
of that Portfolio's net assets invested in such securities will not exceed one
percent.

(j) The quarterly investment advisory fee that is paid by a Plan to the
Consulting Group for investment advisory services rendered to such Plan will be
offset by such amount as is necessary to assure that the Consulting Group
retains no more than 20 basis points from any Portfolio (with the exception of
the Government Money Investments Portfolio and the GIC Fund Portfolio for which
the Consulting Group and the Trust will retain no investment management fee)
which contains investments attributable to the Plan investor.

(k) With respect to its participation in the TRAK Program prior to purchasing
Trust shares,

(1) Each Plan will receive the following written or oral disclosures from the
Consulting Group:

(A) A copy of the Prospectus for the Trust discussing the investment
objectives of the Portfolios comprising the Trust, the policies employed to
achieve these objectives, the corporate affiliation existing between the
Consulting Group, Salomon Smith Barney and its subsidiaries and the
compensation paid to such entities./6/

(B) Upon written or oral request to Salomon Smith Barney, a Statement of
Additional Information supplementing the Prospectus which describes the types
of securities and other instruments in which the Portfolios may invest, the
investment policies and strategies that the Portfolios may utilize and certain
risks attendant to those investments, policies and strategies.

(C) A copy of the investment advisory agreement between the Consulting Group
and such Plan relating to participation in the TRAK Program and, if applicable,
informing Plan investors of the Automatic Reallocation Option.

(D) Upon written request of Salomon Smith Barney, a copy of the respective
investment advisory agreement between the Consulting Group and the Sub-
Advisers.

(E) In the case of a Section 404(c) Plan, if required by the arrangement
negotiated between the Consulting Group and the Plan, an explanation by a
Salomon Smith Barney Financial Consultant (the Financial Consultant) to
eligible participants in such Plan, of the services offered under the TRAK
Program and the operation and objectives of the Portfolios.

(F) A copy of PTE 94-50 as well as the proposed exemption and the final
exemption pertaining to the exemptive relief described herein.

(2) If accepted as an investor in the TRAK Program, an Independent Plan
Fiduciary of an IRA or Keogh Plan, is required to acknowledge, in writing,
prior to purchasing Trust shares that
such fiduciary has received copies of the documents described above in
subparagraph (k)(1) of this Section.

(3) With respect to a Section 404(c) Plan, written acknowledgement of the
receipt of such documents will be provided by the Independent Plan Fiduciary
(i.e., the Plan administrator, trustee or named fiduciary, as the recordholder
of Trust shares). Such Independent Plan Fiduciary will be required to represent
in writing to Salomon Smith Barney that such fiduciary is (a) independent of
Salomon Smith Barney and its affiliates and (b) knowledgeable with respect to
the Plan in administrative matters and funding matters related thereto, and
able to make an informed decision concerning participation in the TRAK Program.

(4) With respect to a Plan that is covered under Title I of the Act, where
investment decisions are made by a trustee, investment manager or a named
fiduciary, such
- -------
/6/ The fact that certain transactions and fee arrangements are the subject of
an administrative exemption does not relieve the Independent Plan Fiduciary
from the general fiduciary responsibility provisions of section 404 of the Act.
In this regard, the Department expects the Independent Plan Fiduciary to
consider carefully the totality of fees and expenses to be paid by the Plan,
including the fees paid directly to Salomon Smith Barney or to other third
parties and/or indirectly through the Trust to Smith Barney.
B-22
<PAGE>

Independent Plan Fiduciary is required to acknowledge, in writing, receipt of
such documents and represent to Salomon Smith Barney that such fiduciary is (a)
independent of Salomon Smith Barney and its affiliates, (b) capable of making
an independent decision regarding the investment of Plan assets and (c)
knowledgeable with respect to the Plan in administrative matters and funding
matters related thereto, and able to make an informed decision concerning
participation in the TRAK Program.

(l) Subsequent to its participation in the TRAK Program, each Plan receives
the following written or oral disclosures with respect to its ongoing
participation in the TRAK Program:

(1) The Trust's semi-annual and annual report which will include financial
statement for the Trust and investment management fees paid by each Portfolio.

(2) A written quarterly monitoring statement containing an analysis and an
evaluation of a

[[Page 16492]]

Plan investor's account to ascertain whether the Plan's investment objectives
have been met and recommending, if required, changes in Portfolio allocations.

(3) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly, detailed investment performance monitoring
report, in writing, provided to an Independent Plan Fiduciary of such Plan
showing, Plan level asset allocations, Plan cash flow analysis and annualized
risk adjusted rates of return for Plan investments. In addition, if required by
such arrangement, Financial Consultants will meet periodically with Independent
Plan Fiduciaries of Section 404(c) Plans to discuss the report as well as with
eligible participants to review their accounts' performance.

(4) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly participant performance monitoring report
provided to a Plan participant which accompanies the participant's benefit
statement and describes the investment performance of the Portfolios, the
investment performance of the participant's individual investment in the TRAK
Program, and gives market commentary and toll-free numbers that will enable the
participant to obtain more information about the TRAK Program or to amend his
or her investment allocations.

(5) On a quarterly and annual basis, written disclosures to all Plans of the
(a) percentage of each Portfolio's brokerage commissions that are paid to
Salomon Smith Barney and its affiliates and (b) the average brokerage
commission per share paid by each Portfolio to Salomon Smith Barney and its
affiliates, as compared to the average brokerage commission per share paid by
the Trust to brokers other than Salomon Smith Barney and its affiliates, both
expressed as cents per share.

(m) Salomon Smith Barney shall maintain, for a period of six years, the
records necessary to enable the persons described in paragraph (n) of this
Section to determine whether the conditions of this exemption have been met,
except that (1) a prohibited transaction will not be considered to have
occurred if, due to circumstances beyond the control of Salomon Smith Barney
and/or its affiliates, the records are lost or destroyed prior to the end of
the six year period, and (2) no party in interest other than Salomon Smith
Barney shall be subject to the civil penalty that may be assessed under section
502(i) of the Act, or to the taxes imposed by section 4975(a) and (b) of the
Code, if the records are not maintained, or are not available for examination
as required by paragraph (n) below.

(n)(1) Except as provided in section (2) of this paragraph and notwithstanding
any provisions of subsections (a)(2) and (b) of section 504 of the Act, the
records referred to in paragraph (m) of this Section II shall be
unconditionally available at their customary location during normal business
hours by:

(A) Any duly authorized employee or representative of the Department or the
Service;

(B) Any fiduciary of a participating Plan or any duly authorized
representative of such fiduciary;
(C) Any contributing employer to any participating Plan or any duly authorized
employee representative of such employer; and

(D) Any participant or beneficiary of any participating Plan, or any duly
authorized representative of such participant or beneficiary.

(2) None of the persons described above in subparagraphs (B)-(D) of this
paragraph (n) shall be authorized to examine the trade secrets of Salomon Smith
Barney or commercial or financial information which is privileged or
confidential.

Section III. Definitions

For purposes of this exemption,

(a) The term "Salomon Smith Barney" means Salomon Smith Barney Inc. and any
affiliate of Salomon Smith Barney, as defined in paragraph (b) of this Section
III.

(b) An "affiliate" of Salomon Smith Barney includes--

(1) Any person directly or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with Salomon Smith Barney.
(For purposes of this subsection, the term "control" means the power to
exercise a controlling influence over the management or policies of a person
other than an individual.)

(2) Any officer, director or partner in such person, and

(3) Any corporation or partnership of which such person is an officer,
director or a 5 percent partner or owner.

(c) An "Independent Plan Fiduciary" is a Plan fiduciary which is independent
of Salomon Smith Barney and its affiliates and is either--

(1) A Plan administrator, sponsor, trustee or named fiduciary, as the
recordholder of Trust shares under a Section 404(c) Plan;

(2) A participant in a Keogh Plan;

(3) An individual covered under (A) a self-directed IRA, or (B) a Section
403(b) Plan which invests in Trust shares;

(5) A participant in a Plan, such as a Section 404(c) Plan, who is permitted
under the terms of such Plan to direct, and who elects to direct the investment
of assets of his or her account in such Plan.

Section IV. Effective Dates

This exemption is effective as of July 31, 1993 with respect to the
transactions described in Section I.A. and B.(1). of this grant notice. It is
also effective as of March 29, 1994 for transactions involving a daily-traded
collective investment fund that was added to the TRAK Program pursuant to PTE
94-50. With respect to Section I.B(2) and Section II(f)(1)-(4) of the General
Conditions of this grant notice, which set forth the amendments to PTE 94-50,
this exemption is effective as of November 9, 1998.

B-23
<PAGE>

The availability of this exemption is subject to the express condition that
the material facts and representations contained in the application for
exemption are true and complete and accurately describe all material terms of
the transactions. In the case of continuing transactions, if any of the
material facts or representations described in the application change, the
exemption will cease to apply as of the date of such change. In the event of
any such change, an application for a new exemption must be made to the
Department.

For a more complete statement of the facts and representations supporting the
Department's decision to grant the case of continuing transactions, if any of
the material facts or representations described in the application change, the
exemption will cease to apply as of the date of such change. In the event of
any such change, an application for a new exemption must be made to the
Department.

For a more complete statement of the facts and representations supporting the
Department's decision to grant this exemption, refer to the proposed exemption
and PTEs 92-77 and 94-50 which are cited above.

[[Page 16493]]

Signed at Washington, DC, this 30th day of March, 1999.

Ivan L. Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration,
Department of Labor.

[FR Doc. 99-8226 Filed 4-2-99; 8:45 am]
BILLING CODE 4510-29-P

B-24
<PAGE>

For More Information

- --------------------------------------------------------------------------------

If you want more information about the Portfolio or the other portfolios that
comprise the Trust, the following resources are available upon request.

Annual and Semiannual Reports

Additional information about the Portfolio's investments will be available in
the Portfolio's annual and semiannual reports to shareholders. The Portfolio's
annual report will contain a discussion of the market conditions and investment
strategies that significantly affected the Portfolio's performance during its
last fiscal year.

Statement of Additional Information

The Statement of Additional Information provides more detailed information about
the Portfolio and is incorpo-rated into this prospectus by reference.

Investment Professional

The investor's Financial Consultant is available to answer questions about the
Portfolio or the investor's overall asset allocation program.

Investors can get free copies of reports and SAIs, request other information and
discuss their questions about the Portfolio by contacting their Financial
Consultant, or the Consulting Group at:

The Consulting Group
222 Delaware Avenue
Wilmington, Delaware 19801

Telephone: 1-212-816-8725

Investors can review and copy the Portfolio's reports and SAI at the Public
Reference Room of the Securities and Exchange Commission. Investors can get
text-only copies for free from the Commission's Internet website at:
http://www.sec.gov, or for a duplicating fee by calling or writing to:

Public Reference Section of the Commission
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330

If someone makes a statement about the Portfolio that is not in this prospectus,
you should not rely upon that information. Neither the Portfolio nor the
distributor is offering to sell shares of the Portfolio to any person to whom
the Portfolio may not lawfully sell such shares.

Investment Company Act File No. 811-_____

SALOMONSMITHBARNEY
---------------------------
A member of citigroup[LOGO]

Salomon Smith Barney, Inc, is a wholly-owned subsidiary of Citigroup Inc.
Citigroup businesses produce a broad range of financial services--asset
management, banking and consumer finance, credit and charge cards, insurance,
investments and investment banking and trading--and use diverse channels to make
them available to consumer and corporate customers around the world.

(R)1999 Salomon Smith Barney Inc. TK__ 9/99

PART B

STATEMENT OF ADDITIONAL INFORMATION

CONSULTING GROUP CAPITAL MARKETS FUNDS
MULTI-SECTOR FIXED INCOME INVESTMENTS
SEPTEMBER ___, 1999

222 Delaware Avenue ~ Wilmington, Delaware 19801 ~
(212) 816-8725

This Statement of Additional Information supplements the
information contained in the current Prospectus (the "Prospectus") of
Multi-Sector Fixed Income Investments (the "Portfolio"), a separate
series of Consulting Group Capital Markets Funds (the "Trust"), dated
September ___, 1999, and should be read in conjunction with the
Prospectus. The Trust is a series company that consists of the
Portfolio and fifteen other portfolios offered in separate
prospectuses. The Prospectus for the Portfolio may be obtained by
contacting any Financial Consultant of Salomon Smith Barney Inc.
("Salomon Smith Barney"), or by writing or calling the Trust at the
address or telephone number listed above. This Statement of Additional
Information, although not in itself a prospectus, is incorporated by
reference into the Prospectus in its entirety.

CONTENTS

Trustees and Executive Officers of the Trust
1
Investment Objectives, Management Policies and Risk Factors
of the Portfolio
3
Investment Restrictions
19
Portfolio Transactions
21
Portfolio Turnover
22
Investment Management and Other Services
23
Purchase of Shares
25
Redemption of Shares
26
Redemptions in Kind
26
Net Asset Value
26
Determination of Performance
27
Taxes
30
Distributor
33
Custodian and Transfer Agent
33
Appendix
34

Capitalized terms used but not defined in this Statement of Additional
Information have the meanings accorded to them in the Prospectus.

TRUSTEES AND EXECUTIVE OFFICERS OF THE TRUST

The Trustees and executive officers of the Trust, together with
information as to their principal business occupations, are set forth
below. The executive officers of the Trust are employees of
organizations that provide services to the Portfolios. Each Trustee who
is an "interested person" of the Trust, as defined in the 1940 Act, is
indicated by an asterisk. As of the date of this Statement of
Additional Information and the Prospectus, the Trustees and officers of
the Trust as a group did not own any of the outstanding shares of the
Portfolio.

Walter E. Auch, Trustee (Age 78). Consultant to companies in the
financial services industry; Director of Pimco Advisers L.P.; Brinson
Partners; Nicholas-Applegate (each a registered investment adviser);
Legend Properties, a real estate management company; Banyan Realty
Trust; and Banyan Land Fund II. Director or trustee of 2 investment
companies associated with Citigroup Inc. ("Citigroup"). His address is
6001 N. 62nd Place, Paradise Valley, Arizona 85253.

Martin Brody, Trustee (Age 77). Private Investor; Director or
trustee of 20 investment companies associated with Citigroup. His
address is c/o HMK Associates, 30 Columbia Turnpike, Florham Park, N.J.
07932.

H. John Ellis, Trustee (Age 72). Retired. Director or trustee of
2 investment companies associated with Citigroup. His address is 858
East Crystal Downs Drive, Frankfort, Michigan 49635.

Armon E. Kamesar, Trustee (Age 72). Chairman of the Board of TEC,
an international organization of Chief Executive Officers; Trustee,
U.S. Bankruptcy Court. Director or trustee of 2 investment companies
associated with Citigroup. His address is 7328 Country Club Drive, La
Jolla, CA 92037.

Stephen E. Kaufman, Trustee (Age 67). Attorney. Director or
trustee of 13 investment companies associated with Citigroup. His
address is 277 Park Avenue, New York, New York 10172.

*Heath B. McLendon, Trustee and Chairman of the Board (Age 66).
Managing Director of Salomon Smith Barney and Chairman of the Board of
Salomon Smith Barney Strategy Advisers Inc. and Director and President
of SSBC Fund Management Inc. ("SSBC") (formerly known as Mutual
Management Corp.) and Travelers Investment Adviser, Inc. ("TIA"); Mr.
McLendon serves on the Board of 64 investment companies associated with
Citigroup. His address is 388 Greenwich Street, New York, New York
10013.

Lewis E. Daidone, Senior Vice President and Treasurer (Age 41).
Managing Director of Salomon Smith Barney; Direcor and Senior Vice
President of SSBC and TIA. Mr. Daidone serves as Senior Vice President
and Treasurer of 59 investment companies associated with Citigroup. His
address is 388 Greenwich Street, New York, New York 10013.

Frank L. Campanale, Investment Officer (Age 46). President and
Chief Executive Officer of Salomon Smith Barney's Consulting Group.
Prior to 1996, National Sales Director for Consulting Group. His
address is 222 Delaware Avenue, Wilmington, Delaware, 19801.

LeRoy T. Pease, CFA, Investment Officer (Age 40). First Vice
President of Salomon Smith Barney Consulting Group. Prior to 1996,
Chief Investment Officer of EMT Group and Manager for Investment
Strategy for Bell Atlantic, Philadelphia, Pennsylvania. His address is
222 Delaware Avenue, Wilmington, Delaware, 19801.

Christina T. Sydor, Secretary (Age 48) Managing Director of
Salomon Smith Barney; General Counsel and Secretary of SSBC and TIA.
Ms. Sydor serves as Secretary of 59 investment companies associated
with Citigroup. Her address is 388 Greenwich Street, New York New York
10013.

Paul Brook, Controller (Age 45) Director of Salomon Smith Barney;
Controller or Assistant Treasurer of 43 investment companies associated
with Citigroup; from 1997-1998 Managing Director of AMT Capital
Services Inc.; prior to 1997 Partner with Ernst & Young LLP; His
address is 388 Greenwich Street, New York, New York 10013.

Irving David, Controller (Age 38) Director of Salomon Smith
Barney. Controller or Assistant Treasurer of 43 investment companies
associated with Citigroup; Formerly Assistant Treasurer of First
Investment Management Company; His address is 388 Greenwich Street, New
York, New York 10013.

As of September ___, 1999, the Trustees and officers as a group
owned less than 1% of the outstanding common stock of the Trust.

Remuneration. No director, officer or employee of Salomon Smith
Barney, SSBC or any of their affiliates will receive any compensation
from the Trust for serving as an officer or Trustee of the Trust. The
Trust pays each Trustee who is not a director, officer or employee of
Salomon Smith Barney, the Manager, any advisor, SSBC or any of their
affiliates a fee of $32,000 per annum plus $1,000 per meeting attended.
The Trust reimburses the Trustees for travel and out-of-pocket expenses
to attend meetings of the Board. For the fiscal year ended August 31,
1999, such fees and expenses totaled $[ ].

For the fiscal year ended August 31, 1999, the Trustees of the Trust
were paid the following compensation:
Total
Pension or Total Number
Aggregate Retirement Benefits Compensation of
Funds
Compensation Aggregate Accrued as Expense From Served in
Name From Portfolios Compensation of Trust Fund Complex Complex
Heath B. McLendon* None None None None 64
Walter Auch None None $ [ ] 2
Martin Brody None None [ ] 20
Armon E. Kamesar None None [ ] 2
Stephen E. Kaufman None None [ ] 13

* Designates "interested trustee".

INVESTMENT OBJECTIVES, MANAGEMENT POLICIES AND RISK FACTORS

The Portfolio is a diversified, open-end management investment company.
The Prospectus discusses the investment objectives of the Portfolio, a
separate series of the Trust and the policies to be employed to
achieve those objectives. Supplemental information is set out below
concerning the types of securities and other instruments in which the
Portfolio may invest, the investment policies and strategies that the
Portfolio may utilize and certain risks attendant to those investments,
policies and strategies.

Fixed Income Securities. The market value of the obligations held by
the Portfolio can be expected to vary inversely to changes in
prevailing interest rates. Investors also should recognize that, in
periods of declining interest rates, the Portfolio's yield will tend to
be somewhat higher than prevailing market rates and, in periods of
rising interest rates, the Portfolio's yield will tend to be somewhat
lower. Also, when interest rates are falling, the inflow of net new
money to the Portfolio from the continuous sale of its shares will tend
to be invested in instruments producing lower yields than the balance
of its portfolio, thereby reducing the Portfolio's current yield. In
periods of rising interest rates, the opposite can be expected to
occur. In addition, securities in which the Portfolio may invest may
not yield as high a level of current income as might be achieved by
investing in securities with less liquidity, less creditworthiness or
longer maturities.

The Portfolio invests in U.S. Government securities, corporate bonds,
debentures, non-convertible fixed income preferred stocks, mortgage
related securities, asset-backed securities ("ABS"), Eurodollar
certificates of deposit, Eurodollar bonds and Yankee bonds.

Debt Securities Rating Criteria. Investment grade debt securities are
those rated "BBB" or higher by Standard & Poor's Ratings Group ("S &
P"), the equivalent rating of other nationally recognized statistical
rating organizations ("NRSROs") or determined to be of equivalent
credit quality by the subadviser. Debt securities rated BBB are
considered medium grade obligations with speculative characteristics,
and adverse economic conditions or changing circumstances may weaken
the issuer's ability to pay interest and repay principal.

Below investment grade debt securities are those rated "BB" and below
by S & P or the equivalent rating of other NRSROs. Below investment
grade debt securities or comparable unrated securities are commonly
referred to as "junk bonds" and are considered predominantly
speculative and may be questionable as to principal and interest
payments. Changes in economic conditions are more likely to lead to a
weakened capacity to make principal payments and interest payments. The
amount of junk bond securities outstanding has proliferated as an
increasing number of issuers have used junk bonds for corporate
financing. An economic downturn could severely affect the ability of
highly leveraged issuers to service their debt obligations or to repay
their obligations upon maturity. Factors having an adverse impact on
the market value of lower quality securities will have an adverse
effect on the Portfolio's net asset value to the extent it invests in
such securities. In addition, the Portfolio may incur additional
expenses to the extent it is required to seek recovery upon a default
in payment of principal or interest on its portfolio holdings.

The secondary market for junk bond securities, which is concentrated in
relatively few market makers, may not be as liquid as the secondary
market for more highly rated securities, a factor which may have an
adverse effect on the Portfolio's ability to dispose of a particular
security when necessary to meet its liquidity needs. Under adverse
market or economic conditions, the secondary market for junk bond
securities could contract further, independent of any specific adverse
changes in the condition of a particular issuer. As a result, the
Portfolio could find it more difficult to sell these securities or may
be able to sell the securities only at prices lower than if such
securities were widely traded. Prices realized upon the sale of such
lower rated or unrated securities, under these circumstances, may be
less than the prices used in calculating the Portfolio's net asset
value.

Since investors generally perceive that there are greater risks
associated with lower quality debt securities of the type in which the
Portfolio may invest a portion of its assets, the yields and prices of
such securities may tend to fluctuate more than those for higher rated
securities. In the lower quality segments of the debt securities
market, changes in perceptions of issuers' creditworthiness tend to
occur more frequently and in a more pronounced manner than do changes
in higher quality segments of the debt securities market, resulting in
greater yield and price volatility.

Lower rated and comparable unrated debt securities tend to offer higher
yields than higher rated securities with the same maturities because
the historical financial condition of the issuers of such securities
may not have been as strong as that of other issuers. However, lower
rated securities generally involve greater risks of loss of income and
principal than higher rated securities. The subadvisers will attempt
to reduce these risks through portfolio diversification and by analysis
of each issuer and its ability to make timely payments of income and
principal, as well as broad economic trends and corporate developments.

The definitions of the ratings of debt obligations may be found in the
Appendix following this Statement of Additional Information.

Ratings as Investment Criteria. In general, the ratings of an NRSRO
such as Moody's Investors Service, Inc. ("Moody's") and S&P represent
the opinions of those agencies as to the quality of debt obligations
that they rate. It should be emphasized, however, that these ratings
are relative and subjective, are not absolute standards of quality and
do not evaluate the market risk of securities. These ratings will be
used by the Portfolio as initial criteria for the selection of
portfolio securities, but the Portfolio also will rely upon the
independent advice of their respective investment advisors
(collectively, the "Subadvisors") to evaluate potential investments.
Among the factors that will be considered are the long term ability of
the issuer to pay principal and interest and general economic trends.

Subsequent to its purchase by the Portfolio, an issue of debt
obligations may cease to be rated or its rating may be reduced below
the minimum required for purchase by the Portfolio. Neither event will
require the sale of the debt obligation by the Portfolio, but the
Portfolio's Subadvisors will consider the event in its determination of
whether the Portfolio should continue to hold the obligation. In
addition, to the extent that the ratings change as a result of changes
in rating organizations or their rating systems or owing to a corporate
restructuring of an NRSRO, the Portfolio will attempt to use comparable
ratings as standards for its investments in accordance with its
investment objectives and policies.

Mortgage Backed Securities. The average maturity of pass-through pools
of mortgage backed securities varies with the maturities of the
underlying mortgage instruments. In addition, a pool's stated maturity
may be shortened by unscheduled payments on the underlying mortgages.
Factors affecting mortgage prepayments include the level of interest
rates, general economic and social conditions, the location of the
mortgaged property and age of the mortgage. Because prepayment rates of
individual pools vary widely, it is not possible to accurately predict
the average life of a particular pool. Common practice is to assume
that prepayments will result in an average life ranging from two to ten
years for pools of fixed rate 30-year mortgages. Pools of mortgages
with other maturities of different characteristics will have varying
average life assumptions.

Mortgage backed securities may be classified as private, governmental
or government related, depending on the issuer or guarantor. Private
mortgage backed securities represent pass-through pools consisting
principally of conventional residential mortgage loans created by non-
governmental issuers, such as commercial banks, savings and loan
associations and private mortgage insurance companies. Governmental
mortgage backed securities are backed by the full faith and credit of
the United States. Government National Mortgage Association ("GNMA"),
the principal U.S. guarantor of such securities, is a wholly owned U.S.
Governmental Corporation within the Department of Housing and Urban
Development. Government related mortgage backed securities are not
backed by the full faith and credit of the United States. Issuers of
these securities include the Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is
a government sponsored corporation owned entirely by private
stockholders that is subject to general regulation by the Secretary of
Housing and Urban Development. Pass-through securities issued by FNMA
are guaranteed as to timely payment of principal and interest by FNMA.
FHLMC is a corporate instrumentality of the United States, the stock of
which is owned by the Federal Home Loan Banks. Participation
certificates representing interests in mortgages from FHLMC's national
portfolio are guaranteed as to the timely payment of interest and
ultimate collection of principal by FHLMC.

The Trust expects that private and governmental entities may create
mortgage loan pools offering pass-through investments in addition to
those described above. The mortgages underlying these securities may be
alternative mortgage instruments, that is, mortgage instruments whose
principal or interest payments may vary or whose terms to maturity may
be shorter than previously customary. As new types of mortgage backed
securities are developed and offered to investors, the Trust,
consistent with the Portfolio's investment objectives and policies,
will consider making investments in those new types of securities on
behalf of the Portfolio. The Portfolio will not invest more than 25%
of its assets in privately issued mortgage related securities.

The Portfolio may invest in government stripped mortgage related
securities, collateralized mortgage obligations ("CMOs") collateralized
by mortgage loans or mortgage pass-through certificates and zero coupon
securities, which, due to changes in interest rates, may be more
speculative and subject to greater fluctuations in value that
securities that pay interest currently. CMOs are obligations fully
collateralized by a portfolio of mortgages or mortgage related
securities. Payments of principal and interest on the mortgages are
passed through to the holders of the CMOs on the same schedule as they
are received, although certain classes of CMOs have priority over
others with respect to the receipt of prepayments on the mortgages.
Therefore, depending on the type of CMOs in which the Portfolio
invests, the investment may be subject to a greater or lesser risk of
prepayment than other types of mortgage related securities.

The Portfolio also may invest in pass-through securities backed by
adjustable rate mortgages that have been introduced by GNMA, FNMA and
FHLMC. These securities bear interest at a rate that is adjusted
monthly, quarterly or annually. The prepayment experience of the
mortgages underlying these securities may vary from that for fixed rate
mortgages. The Portfolio will only purchase mortgage related securities
issued by persons that are governmental agencies or instrumentalities
or fall outside, or are excluded from, the definition of investment
company under the Investment Company Act of 1940, as amended (the "1940
Act").

Asset-Backed Securities ("ABS"). The Portfolio may invest up to 10% of
its assets in ABSs. ABSs may enhance the Portfolio's performance,
however their use involves certain risks that may not be found in other
mutual fund investments. The Portfolio will only invest in ABSs that
have received a AAA rating from both Moody's and Standard & Poor's or
an equivalent rating from another nationally recognized statistical
rating organization.

Mortgage Dollar Roll Transactions. In order to enhance current income,
the Portfolio may enter into mortgage dollar rolls with respect to
mortgage related securities issued by GNMA, FNMA and FHLMC. In a
mortgage dollar roll transaction, a Portfolio sells a mortgage related
security to a financial institution, such as a bank or a broker-dealer,
and simultaneously agrees to repurchase a similar security from the
institution at a later date at an agreed upon price. The mortgage
related securities that are repurchased will bear the same interest
rate as those sold, but generally will be collateralized by different
pools of mortgages with different prepayment histories than those sold.
During the period between the sale and repurchase, the Portfolio will
not be entitled to receive interest and principal payments on the
securities sold. Proceeds of the sale will be invested in short-term
instruments, particularly repurchase agreements, and the income from
these investments, together with any additional fee income received on
the sale, is intended to generate income for the Portfolio exceeding
the yield on the securities sold. Mortgage dollar roll transactions
involve the risk that the market value of the securities sold by the
Portfolio may decline below the repurchase price of those securities.
At the time the Portfolio enters into a mortgage dollar roll
transaction, it will place in a segregated custodial account liquid
securities having a value equal to the repurchase price (including
accrued interest) and will subsequently monitor the account to insure
that the equivalent value is maintained. Mortgage dollar roll
transactions are considered to be borrowings by the Portfolio.

High Yield Securities. The Portfolio may invest in medium or lower
rated securities and unrated securities of comparable quality,
sometimes referred to as "junk bonds." Generally, medium or lower
rated securities and unrated securities of comparable quality offer a
higher current yield than is offered by higher rated securities, but
also (i) will likely have some quality and protective characteristics
that, in the judgment of the rating organizations, are outweighed by
large uncertainties or major risk exposures to adverse conditions and
(ii) are predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the
terms of the obligations.

The market values of certain of these securities also tend to be more
sensitive to individual corporate developments and changes in economic
conditions than higher quality bonds. In addition, medium and lower
rated securities and comparable unrated securities generally present a
higher degree of credit risk. The risk of loss due to default by these
issuers is significantly greater because medium and lower rated
securities generally are unsecured and frequently subordinated to the
prior payment of senior indebtedness. In light of these risks, the
Board of Trustees has instructed the Advisors, in evaluating the
creditworthiness of an issue, whether rated or unrated, to take various
factors into consideration, which may include, as applicable, the
issuer's financial resources, its sensitivity to economic conditions
and trends, the operating history of and the community support for the
facility financed by the issue, the ability of the issuer's management
and regulatory matters.

In addition, the market value of securities in lower rated categories
is more volatile than that of higher quality securities, and the
markets in which medium and lower rated securities are traded are more
limited that those in which higher rated securities are traded. The
existence of limited markets may make it more difficult for the
Portfolio to obtain accurate market quotations for purposes of valuing
its securities and calculating its net asset value. Moreover, the lack
of a liquid trading market may restrict the availability of securities
for the Portfolio to purchase and may also have the effect of limiting
the ability of the Portfolio to sell securities at their fair value
either to meet redemption requests or to respond to changes in the
economy or the financial markets.

Lower rated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, the
Portfolio may have to replace the security with a lower yielding
security, resulting in a decreased return for investors. Also, the
principal value of bonds moves inversely with movements in interest
rates; in the event of rising interest rates, the value of the
securities held by the Portfolio may decline proportionately more than
a portfolio consisting of higher rated securities. If the Portfolio
experiences unexpected net redemptions, it may be forced to sell its
higher rated bonds, resulting in a decline in the overall credit
quality of the securities held by the Portfolio and increasing the
exposure of the Portfolio to the risks of lower rated securities.
Investments in zero coupon bonds may be more speculative and subject to
greater fluctuations in value because of changes in interest rates than
bonds that pay interest currently.

Subsequent to its purchase by the Portfolio, an issue of securities may
cease to be rated or its rating may be reduced below the minimum
required for purchase by the Portfolio. Neither event will require
sale of these securities by the Portfolio, but the Advisor will
consider the event in determining whether the Portfolio should continue
to hold the security.

Non-Publicly Traded Securities. The Portfolio may invest in non-
publicly traded securities, which may be less liquid than publicly
traded securities. Although these securities may be resold in
privately negotiated transactions, the prices realized from these sales
could be less than those originally paid by the Portfolio. In
addition, companies whose securities are not publicly traded are not
subject to the disclosure and other investor protection requirements
that may be applicable if their securities were publicly traded.

Real Estate Investment Trusts ("REITs"). The Portfolio may invest in
REITs. REITs are pooled investment vehicles which invest primarily in
income producing real estate or real estate related loans or interests.
REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest the
majority of their assets directly in real property and derive income
primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value.
Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments.
REITs are not taxed on income distributed to shareholders provided they
comply with the applicable requirements of the Internal Revenue Code of
1986, as amended (the "Code"). Debt securities issued by REITs, for the
most part, are general and unsecured obligations and are subject to
risks associated with REITs.

Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general.
An equity REIT may be affected by changes in the value of the
underlying properties owned by the REIT. A mortgage REIT may be
affected by changes in interest rates and the ability of the issuers of
its portfolio mortgages to repay their obligations. REITs are dependent
upon the skills of their managers and are not diversified. REITs are
generally dependent upon maintaining cash flows to repay borrowings and
to make distributions to shareholders and are subject to the risk of
default by lessees or borrowers. REITs whose underlying assets are
concentrated in properties used by a particular industry, such as
health care, are also subject to risks associated with such industry.

REITs (especially mortgage REITs) are also subject to interest rate
risks. When interest rates decline, the value of a REIT's investment in
fixed rate obligations can be expected to rise. Conversely, when
interest rates rise, the value of a REIT's investment in fixed rate
obligations can be expected to decline. If the REIT invests in
adjustable rate mortgage loans the interest rates on which are reset
periodically, yields on a REIT's investments in such loans will
gradually align themselves to reflect changes in market interest rates.
This causes the value of such investments to fluctuate less
dramatically in response to interest rate fluctuations than would
investments in fixed rate obligations.

REITs may have limited financial resources, may trade less frequently
and in a limited volume and may be subject to more abrupt or erratic
price movements than larger company securities. Historically REITs have
been more volatile in price than the larger capitalization stocks
included in Standard & Poor's 500 Stock Index (the "S&P 500").

Other Investment Companies. The Portfolio may invest in the securities
of other investment companies to the extent such investments are
consistent with the Portfolio's investment objective and policies and
permissible under the 1940 Act. Under the 1940 Act, the Portfolio may
not acquire the securities of other domestic or foreign investment
companies if, as a result, (i) more than 10% of the Portfolio's total
assets would be invested in securities of other investment companies,
(ii) such purchase would result in more than 3% of the total
outstanding voting securities of any one investment company being held
by the Portfolio, or (iii) more than 5% of the Portfolio's total assets
would be invested in any one investment company. These limitations do
not apply to the purchase of shares of any investment company in
connection with a merger, consolidation, reorganization or acquisition
of substantially all the assets of another investment company. The
Portfolio will not invest in other investment companies for which the
subadvisers or any of their affiliates act as an investment adviser or
distributor.

The Portfolio, as a holder of the securities of other investment
companies, will bear its pro rata portion of the other investment
companies' expenses, including advisory fees. These expenses are in
addition to the direct expenses of the Portfolio's own operations.

ADRs, EDRs and GDRs. The Portfolio may also purchase American
Depository Receipts ("ADRs"), European Depository Receipts ("EDRs") and
Global Depository Receipts ("GDRs") or other securities representing
underlying shares of foreign companies. ADRs are publicly traded on
exchanges or over-the-counter in the United States and are issued
through "sponsored" or "unsponsored" arrangements. In a sponsored ADR
arrangement, the foreign issuer assumes the obligation to pay some or
all of the depository's transaction fees, whereas under an unsponsored
arrangement, the foreign issuer assumes no obligation and the
depository's transaction fees are paid by the ADR holders. In
addition, less information is available in the United States about an
unsponsored ADR than about a sponsored ADR, and the financial
information about a company may not be as reliable for an unsponsored
ADR as it is for a sponsored ADR. The Portfolio may invest in ADRs
through both sponsored and unsponsored arrangements.

Risks of Non-U.S. Investments. To the extent the Portfolio invests in
the securities of non-U.S. issuers, those investments involve
considerations and risks not typically associated with investing in the
securities of issuers in the U.S. These risks are heightened with
respect to investments in countries with emerging markets and
economies. The risks of investing in securities of non-U.S. issuers or
issuers with significant exposure to non-U.S. markets may be related,
among other things, to (i) differences in size, liquidity and
volatility of, and the degree and manner of regulation of, the
securities markets of certain non-U.S. markets compared to the
securities markets in the U.S.; (ii) economic, political and social
factors; and (iii) foreign exchange matters, such as restrictions on
the repatriation of capital, fluctuations in exchange rates between the
U.S. dollar and the currencies in which the Portfolio's portfolio
securities are quoted or denominated, exchange control regulations and
costs associated with currency exchange. The political and economic
structures in certain non-U.S. countries, particularly emerging
markets, are expected to undergo significant evolution and rapid
development, and such countries may lack the social, political and
economic stability characteristic of more developed countries.
Unanticipated political or social developments may affect the values of
the Portfolio's investments in such countries. The economies and
securities and currency markets of many emerging markets have
experienced significant disruption and declines. There can be no
assurances that these economic and market disruptions will not
continue.

Foreign Securities Markets and Regulations. There may be less publicly
available information about non-U.S. markets and issuers than is
available with respect to U.S. securities and issuers. Non-U.S.
companies generally are not subject to accounting, auditing and
financial reporting standards, practices and requirements comparable to
those applicable to U.S. companies. The trading markets for most non-
U.S. securities are generally less liquid and subject to greater price
volatility than the markets for comparable securities in the U.S. The
markets for securities in certain emerging markets are in the earliest
stages of their development. Even the markets for relatively widely
traded securities in certain non-U.S. markets, including emerging
countries, may not be able to absorb, without price disruptions, a
significant increase in trading volume or trades of a size customarily
undertaken by institutional investors in the U.S. Additionally, market
making and arbitrage activities are generally less extensive in such
markets, which may contribute to increased volatility and reduced
liquidity. The less liquid a market, the more difficult it may be for
the Portfolio to accurately price its portfolio securities or to
dispose of such securities at the times determined by the subadviser to
be appropriate. The risks associated with reduced liquidity may be
particularly acute in situations in which the Portfolio's operations
require cash, such as in order to meet redemptions and to pay its
expenses.

Economic, Political and Social Factors. Certain non-U.S. countries,
including emerging markets, may be subject to a greater degree of
economic, political and social instability than is the case in the U.S.
and Western European countries. Such instability may result from, among
other things: (i) authoritarian governments or military involvement in
political and economic decision making; (ii) popular unrest associated
with demands for improved economic, political and social conditions;
(iii) internal insurgencies; (iv) hostile relations with neighboring
countries; and (v) ethnic, religious and racial disaffection and
conflict. Such economic, political and social instability could
significantly disrupt the financial markets in such countries and the
ability of the issuers in such countries to repay their obligations.
Investing in emerging countries also involves the risk of
expropriation, nationalization, confiscation of assets and property or
the imposition of restrictions on foreign investments and on
repatriation of capital invested. In the event of such expropriation,
nationalization or other confiscation in any emerging country, the
Portfolio could lose its entire investment in that country.

Certain emerging market countries restrict or control foreign
investment in their securities markets to varying degrees. These
restrictions may limit the Portfolio's investment in those markets and
may increase the expenses of the Portfolio. In addition, the
repatriation of both investment income and capital from certain markets
in the region is subject to restrictions such as the need for certain
governmental consents. Even where this is no outright restriction on
repatriation of capital, the mechanics of repatriation may affect
certain aspects of the Portfolio's operation.

Economies in individual non-U.S. countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross
domestic product, rates of inflation, currency valuation, capital
reinvestment, resource self-sufficiency and balance of payments
positions. Many non-U.S. countries have experienced substantial, and in
some cases extremely high, rates of inflation for many years. Inflation
and rapid fluctuations in inflation rates have had, and may continue to
have, very negative effects on the economies and securities markets of
certain emerging countries.

Economies in emerging countries generally are dependent heavily upon
international trade and, accordingly, have been and may continue to be
affected adversely by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist
measures imposed or negotiated by the countries with which they trade.
These economies also have been, and may continue to be, affected
adversely by economic conditions in the countries with which they
trade.

Currency Risks. The value of the securities quoted or denominated in
international currencies may be adversely affected by fluctuations in
the relative currency exchange rates and by exchange control
regulations. The Portfolio's investment performance may be negatively
affected by a devaluation of a currency in which the Portfolio's
investments are quoted or denominated. Further, the Portfolio's
investment performance may be significantly affected, either positively
or negatively, by currency exchange rates because the U.S. dollar value
of securities quoted or denominated in another currency will increase
or decrease in response to changes in the value of such currency in
relation to the U.S. dollar.

Custodian Services and Related Investment Costs. Custodial services
and other costs relating to investment in international securities
markets generally are more expensive than in the U.S. Such markets have
settlement and clearance procedures that differ from those in the U.S.
In certain markets there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making
it difficult to conduct such transactions. The inability of the
Portfolio to make intended securities purchases due to settlement
problems could cause the Portfolio to miss attractive investment
opportunities. Inability to dispose of a portfolio security caused by
settlement problems could result either in losses to the Portfolio due
to a subsequent decline in value of the portfolio security or could
result in possible liability to the Portfolio. In addition, security
settlement and clearance procedures in some emerging countries may not
fully protect the Portfolio against loss or theft of its assets.

Withholding and Other Taxes. The Portfolio will be subject to taxes,
including withholding taxes, on income (possibly including, in some
cases, capital gains) that are or may be imposed by certain non-U.S.
countries with respect to the Portfolio's investments in such
countries. These taxes will reduce the return achieved by the
Portfolio. Treaties between the U.S. and such countries may not be
available to reduce the otherwise applicable tax rates.

Economic Monetary Union ("EMU"). On January 1, 1999, 11 European
countries adopted a single currency - the Euro. The conversion to the
Euro is being phased in over a three-year period. For participating
countries, EMU will mean sharing a single currency and single official
interest rate and adhering to agreed upon limits on government
borrowing. Budgetary decisions will remain in the hands of each
participating country, but will be subject to each country's commitment
to avoid "excessive deficits" and other more specific budgetary
criteria. A European Central Bank is responsible for setting the
official interest rate to maintain price stability within the Euro
zone.

EMU is driven by the expectation of a number of economic benefits,
including lower transaction cost, reduced exchange risk, greater
competition, and a broadening and deepening of European financial
markets. However, there are a number of significant risks associated
with EMU. Monetary and economic union on this scale has never been
attempted before. There is a significant degree of uncertainty as to
whether participating countries will remain committed to EMU in the
face of changing economic conditions. This uncertainty may increase
the volatility of European markets.

Currency Exchange Rates. The Portfolio's share value may change
significantly when the currencies, other than the U.S. dollar, in which
the Portfolio's investments are quoted or denominated, strengthen or
weaken against the U.S. dollar. Currency exchange rates generally are
determined by the forces of supply and demand in the foreign exchange
markets and the relative merits of investments in different countries
as seen from an international perspective. Currency exchange rates can
also be affected unpredictably by intervention by U.S. or foreign
governments or central banks or by currency controls or political
developments in the United States or abroad.

Forward Currency Contracts. The Portfolio may invest in securities
quoted or denominated in foreign currencies, may hold currencies to
meet settlement requirements for foreign securities and may engage in
currency exchange transactions in order to protect against uncertainty
in the level of future exchange rates between a particular foreign
currency and the U.S. dollar or between foreign currencies in which the
Portfolio's securities are or may be quoted or denominated. Forward
currency contracts are agreements to exchange one currency for another,
for example, to exchange a certain amount of U.S. dollars for a certain
amount of French francs at a future date. The date (which may be any
agreed upon fixed number of days in the future), the amount of currency
to be exchanged and the price at which the exchange will take place
will be negotiated with a currency trader and fixed for the term of the
contract at the time the Portfolio enters into the contract. To assure
that the Portfolio's forward currency contracts are not used to achieve
investment leverage, the Portfolio will segregate cash or high grade
securities with its custodian in an amount at all times equal to or
exceeding the Portfolio's commitment with respect to these contracts.

Forward currency contracts (i) are traded in an interbank market
conducted directly between currency traders (typically commercial banks
or other financial institutions) and their customers, (ii) generally
have no deposit requirements and (iii) are typically consummated
without payment of any commissions. The Portfolio, however, may enter
into forward currency contracts containing either or both deposit
requirements and commissions.

At or before the maturity of a forward currency contract, the Portfolio
may either sell a portfolio security and make delivery of the currency,
or retain the security and offset its contractual obligation to deliver
the currency by purchasing a second contract pursuant to which the
Portfolio will obtain, on the same maturity date, the same amount of
the currency that it is obligated to deliver. If the Portfolio retains
the portfolio security and engages in an offsetting transaction, the
Portfolio, at the time of execution of the offsetting transaction, will
incur a gain or a loss to the extent movement has occurred in forward
currency contract prices. Should forward prices decline during the
period between the Portfolio's entering into a forward currency
contract for the sale of a currency and the date it enters into an
offsetting contract for the purchase of the currency, the Portfolio
will realize a gain to the extent the price of the currency it has
agreed to sell exceeds the price of the currency it has agreed to
purchase. Should forward prices increase, the Portfolio will suffer a
loss to the extent the price of the currency it has agreed to purchase
exceeds the price of the currency it has agreed to sell.

In hedging specific portfolio positions, the Portfolio may enter into a
forward contract with respect to either the currency in which the
positions are denominated or another currency deemed appropriate by the
Portfolio's Subadvisor. The amount the Portfolio may invest in forward
currency contracts is limited to the amount of the Portfolio's
aggregate investments in foreign currencies. Risks associated with
entering into forward currency contracts include the possibility that
the market for forward currency contracts may be limited with respect
to certain currencies and, upon a contract's maturity, the inability of
a Portfolio to negotiate with the dealer to enter into an offsetting
transaction. Forward currency contracts may be closed out only by the
parties entering into an offsetting contract. In addition, the
correlation between movements in the prices of those contracts and
movements in the price of the currency hedged or used for cover will
not be perfect. There is no assurance an active forward currency
contract market will always exist. These factors will restrict the
Portfolio's ability to hedge against the risk of devaluation of
currencies in which the Portfolio holds a substantial quantity of
securities and are unrelated to the qualitative rating that may be
assigned to any particular security. In addition, although forward
currency contracts limit the risk of loss owing to a decline in the
value of the hedged currency, at the same time, they limit any
potential gain that might result should the value of the currency
increase. If a devaluation is generally anticipated, the Portfolio may
not be able to contract to sell currency at a price above the
devaluation level it anticipates. The successful use of forward
currency contracts as a hedging technique draws upon special skills and
experience with respect to these instruments and usually depends on the
ability of the Portfolio's subadvisor to forecast interest rate and
currency exchange rate movements correctly. Should interest or exchange
rates move in an unexpected manner, the Portfolio may not achieve the
anticipated benefits of forward currency contracts or may realize
losses and thus be in a worse position than if those strategies had not
been used. Many forward currency contracts are subject to no daily
price fluctuation limits so adverse market movements could continue
with respect to those contracts to an unlimited extent over a period of
time.

Options on Securities and Securities Indices. The Portfolio may
purchase put and call options on any security in which it may invest or
options on any securities index based on securities in which it may
invest. The Portfolio would also be able to enter into closing sale
transactions in order to realize gains or minimize losses on options it
has purchased.

Writing Covered Call and Put Options on Securities. A call option
written by the Portfolio obligates the Portfolio to sell specified
securities to the holder of the option at a specified price if the
option is exercised at any time before the expiration date. Call
options that are covered mean that the Portfolio will own the
securities subject to the options as long as the options are
outstanding, or the Portfolio will use the other methods described
below. The Portfolio's purpose in writing covered call options is to
realize greater income than would be realized on portfolio securities
transactions alone. However, the Portfolio may forego the opportunity
to profit from an increase in the market price of the underlying
security.

A covered put option written by the Portfolio would obligate the
Portfolio to purchase specified securities from the option holder at a
specified price if the option is exercised at any time before the
expiration date. Put options that are covered, means that the
Portfolio would have segregated assets with a value at least equal to
the exercise price of the put option. The purpose of writing such
options is to generate additional income for the Portfolio. However, in
return for the option premium, the Portfolio accepts the risk that it
may be required to purchase the underlying security at a price in
excess of its market value at the time of purchase.

Call and put options written by the Portfolio will also be considered
to be covered to the extent the Portfolio's liabilities under such
options are wholly or partially offset by its rights under call and put
options purchased by the Portfolio. In addition, a written call option
or put may be covered by entering into an offsetting forward contract
and/or by purchasing an offsetting option or any other option which, by
virtue of its exercise price or otherwise, reduces the Portfolio's net
exposure on its written option position.

Writing Covered Call and Put Options on Securities Indices. The
Portfolio may also write (sell) covered call and put options on any
securities index composed of securities in which it may invest. Options
on securities indices are similar to options on securities, except that
the exercise of securities index options requires cash payments and
does not involve the actual purchase or sale of securities. In
addition, securities index options are designed to reflect price
fluctuations in a group of securities or segments of the securities
market rather than price fluctuations in a single security.

The Portfolio may cover call options on a securities index by owning
securities whose price changes are expected to be similar to those of
the underlying index, or by having an absolute and immediate right to
acquire such securities without additional cash consideration (or for
additional consideration if cash in such amount is segregated) upon
conversion or exchange of other securities in its portfolio. The
Portfolio may cover call and put options on a securities index by
segregated assets with a value equal to the exercise price.

Writing Uncovered Call and Put Options on Securities and Securities
Indices. The Portfolio may write options that are not covered by
portfolio securities. This is regarded as a speculative investment
technique that could expose the Portfolio to substantial losses. The
Portfolio will designate liquid securities in the amount of its
potential obligation under uncovered options, and increase or decrease
the amount of designated assets daily based on the amount of the then-
current obligation under the option. This designation of liquid assets
will not eliminate the risk of loss from writing the option but it will
ensure that the Portfolio can satisfy its obligations under the option.

Purchasing Call and Put Options. The Portfolio would normally purchase
call options in anticipation of an increase in the market value of
securities of the type in which it may invest. The purchase of a call
option would entitle the Portfolio, in return for the premium paid, to
purchase specified securities at a specified price during the option
period. The Portfolio would ordinarily realize a gain if, during the
option period, the value of such securities exceeded the sum of the
exercise price, the premium paid and transaction costs; otherwise the
Portfolio would realize either no gain or a loss on the purchase of the
call option.

The Portfolio would normally purchase put options in anticipation of a
decline in the market value of securities in its portfolio ("protective
puts") or in securities in which it may invest. The purchase of a put
option would entitle the Portfolio, in exchange for the premium paid,
to sell specified securities at a specified price during the option
period. The purchase of protective puts is designed to offset or hedge
against a decline in the market value of the Portfolio's securities.
Put options may also be purchased by the Portfolio for the purpose of
affirmatively benefiting from a decline in the price of securities
which it does not own. The Portfolio would ordinarily realize a gain
if, during the option period, the value of the underlying securities
decreased below the exercise price sufficiently to more than cover the
premium and transaction costs; otherwise the Portfolio would realize
either no gain or a loss on the purchase of the put option. Gains and
losses on the purchase of protective put options would tend to be
offset by countervailing changes in the value of the underlying
portfolio securities.

Risks of Trading Options. There is no assurance that a liquid
secondary market on an options exchange will exist for any particular
exchange-traded option, or at any particular time. If the Portfolio is
unable to effect a closing purchase transaction with respect to covered
options it has written, the Portfolio will not be able to sell the
underlying securities or dispose of its segregated assets until the
options expire or are exercised. Similarly, if the Portfolio is unable
to effect a closing sale transaction with respect to options it has
purchased, it will have to exercise the options in order to realize any
profit and will incur transaction costs upon the purchase or sale of
underlying securities.

Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on
opening or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to
particular classes or series of options; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the
facilities of an exchange or the Options Clearing Corporation (the
"OCC") may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in
which event the secondary market on that exchange (or in that class or
series of options) would cease to exist, although outstanding options
on that exchange, if any, that had been issued by the OCC as a result
of trades on that exchange would continue to be exercisable in
accordance with their terms.

The Portfolio may terminate its obligations under an exchange-traded
call or put option by purchasing an option identical to the one it has
written. Obligations under over-the-counter options may be terminated
only by entering into an offsetting transaction with the counterparty
to such option. Such purchases are referred to as "closing purchase
transactions."

The Portfolio may purchase and sell both options that are traded on
U.S. and foreign exchanges and options traded over the counter with
broker-dealers who make markets in these options. The ability to
terminate over-the-counter options is more limited than with
exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations.
Until such time as the staff of the Securities and Exchange Commission
(the "SEC") changes its position, the Portfolio will treat purchased
over-the-counter options and all assets used to cover written
over-the-counter options as illiquid securities, except that with
respect to options written with primary dealers in U.S. Government
securities pursuant to an agreement requiring a closing purchase
transaction at a formula price, the amount of illiquid securities may
be calculated with reference to the formula.

Transactions by the Portfolio in options on securities and indices will
be subject to limitations established by each of the exchanges, boards
of trade or other trading facilities governing the maximum number of
options in each class which may be written or purchased by a single
investor or group of investors acting in concert. Thus, the number of
options which the Portfolio may write or purchase may be affected by
options written or purchased by other investment advisory clients. An
exchange, board of trade or other trading facility may order the
liquidations of positions found to be in excess of these limits, and it
may impose certain other sanctions.

The writing and purchase of options is a highly specialized activity
which involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. The
successful use of protective puts for hedging purposes depends in part
on a subadviser's ability to predict future price fluctuations and the
degree of correlation between the options and securities markets.

The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent the options
markets close before the markets for the underlying securities,
significant price movements can take place in the underlying markets
that cannot be reflected in the options markets.

In addition to the risks of imperfect correlation between the
Portfolio's portfolio and the index underlying the option, the purchase
of securities index options involves the risk that the premium and
transaction costs paid by the Portfolio in purchasing an option will be
lost. This could occur as a result of unanticipated movements in the
price of the securities comprising the securities index on which the
option is based.

Futures Contracts and Related Options. The Portfolio may enter into
futures contracts and purchase and write (sell) options on these
contracts, including but not limited to interest rate, securities index
and foreign currency futures contracts and put and call options on
these futures contracts. These contracts will be entered into only
upon the concurrence of the manager that such contracts are necessary
or appropriate in the management of the Portfolio's assets. These
contracts will be entered into on exchanges designated by the Commodity
Futures Trading Commission ("CFTC") or, consistent with CFTC
regulations, on foreign exchanges. These transactions may be entered
into for bona fide hedging and other permissible risk management
purposes including protecting against anticipated changes in the value
of securities the Portfolio intends to purchase.

The Portfolio will not enter into futures contracts and related options
for which the aggregate initial margin and premiums exceed 5% of the
fair market value of the Portfolio's assets after taking into account
unrealized profits and unrealized losses on any contracts it has
entered into. All futures and options on futures positions will be
covered by owning the underlying security or segregation of assets.
With respect to long positions in a futures contract or option (e.g.,
futures contracts to purchase the underlying instrument and call
options purchased or put options written on these futures contracts or
instruments), the underlying value of the futures contract at all times
will not exceed the sum of cash, short-term U.S. debt obligations or
other high quality obligations set aside for this purpose.

The Portfolio may lose the expected benefit of these futures or options
transactions and may incur losses if the prices of the underlying
commodities move in an unanticipated manner. In addition, changes in
the value of the Portfolio's futures and options positions may not
prove to be perfectly or even highly correlated with changes in the
value of its portfolio securities. Successful use of futures and
related options is subject to a subadviser's ability to predict
correctly movements in the direction of the securities markets
generally, which ability may require different skills and techniques
than predicting changes in the prices of individual securities.
Moreover, futures and options contracts may only be closed out by
entering into offsetting transactions on the exchange where the
position was entered into (or a linked exchange), and as a result of
daily price fluctuation limits there can be no assurance that an
offsetting transaction could be entered into at an advantageous price
at any particular time. Consequently, the Portfolio may realize a loss
on a futures contract or option that is not offset by an increase in
the value of its portfolio securities that are being hedged or the
Portfolio may not be able to close a futures or options position
without incurring a loss in the event of adverse price movements.

The Portfolio will incur brokerage costs whether or not its hedging is
successful and will be required to post and maintain "margin" as a
good-faith deposit against performance of its obligations under futures
contracts and under options written by the Portfolio. Futures and
options positions are marked to the market daily and the Portfolio may
be required to make subsequent "variation" margin payments depending
upon whether its positions increase or decrease in value. In this
context margin payments involve no borrowing on the part of the
Portfolio.

U.S. Government Securities. The U.S. Government Securities in which
the Portfolio may invest include debt obligations of varying maturities
issued by the U.S. Treasury or issued or guaranteed by an agency or
instrumentality of the U.S. government, including the Federal Housing
Administration, Federal Financing Bank, Farmers Home Administration,
Export-Import Bank of the U.S., Small Business Administration,
Government National Mortgage Association ("GNMA"), General Services
Administration, Central Bank for Cooperatives, Federal Farm Credit
Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation
("FHLMC"), Federal National Mortgage Association ("FNMA"), Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Student Loan Marketing Association, Resolution Trust Corporation
and various institutions that previously were or currently are part of
the Farm Credit System (which has been undergoing reorganization since
1987). Some U.S. Government Securities, such as U.S. Treasury bills,
Treasury notes and Treasury bonds, which differ only in their interest
rates, maturities and times of issuance, are supported by the full
faith and credit of the United States. Others are supported by: (i)
the right of the issuer to borrow from the U.S. Treasury, such as
securities of the Federal Home Loan Banks; (ii) the discretionary
authority of the U.S. Government to purchase the agency's obligations,
such as securities of the FNMA; or (iii) only the credit of the issuer,
such as securities of the Student Loan Marketing Association. No
assurance can be given that the U.S. Government will provide financial
support in the future to U.S. Government agencies, authorities or
instrumentalities that are not supported by the full faith and credit
of the United States. Securities guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or
instrumentalities include: (i) securities for which the payment of
principal and interest is backed by an irrevocable letter of credit
issued by the U.S. Government or any of its agencies, authorities or
instrumentalities; and (ii) participations in loans made to foreign
governments or other entities that are so guaranteed. The secondary
market for certain of these participations is limited and, therefore,
may be regarded as illiquid.

U.S. Government Securities may include zero coupon securities that may
be purchased when yields are attractive and/or to enhance portfolio
liquidity. Zero coupon U.S. Government Securities are debt obligations
that are issued or purchased at a significant discount from face value.
The discount approximates the total amount of interest the security
will accrue and compound over the period until maturity or the
particular interest payment date at a rate of interest reflecting the
market rate of the security at the time of issuance. Zero coupon U.S.
Government Securities do not require the periodic payment of interest.
These investments benefit the issuer by mitigating its need for cash to
meet debt service, but also require a higher rate of return to attract
investors who are willing to defer receipt of cash. These investments
may experience greater volatility in market value than U.S. Government
Securities that make regular payments of interest. The Portfolio
accrues income on these investments for tax and accounting purposes,
which is distributable to shareholders and which, because no cash is
received at the time of accrual, may require the liquidation of other
portfolio securities to satisfy the Portfolio's distribution
obligations, in which case the Portfolio will forego the purchase of
additional income producing assets with these funds. Zero coupon U.S.
Government Securities include STRIPS and CUBES, which are issued by the
U.S. Treasury as component parts of U.S. Treasury bonds and represent
scheduled interest and principal payments on the bonds.

Custodial Receipts. The Portfolio may acquire custodial receipts or
certificates, such as CATS, TIGRs and FICO Strips, underwritten by
securities dealers or banks that evidence ownership of future interest
payments, principal payments or both on certain notes or bonds issued
by the U.S. Government, its agencies, authorities or instrumentalities.
The underwriters of these certificates or receipts purchase a U.S.
Government Security and deposit the security in an irrevocable trust or
custodial account with a custodian bank, which then issues receipts or
certificates that evidence ownership of the periodic unmatured coupon
payments and the final principal payments on the U.S. Government
Security. Custodial receipts evidencing specific coupon or principal
payments have the same general attributes as zero coupon U.S.
Government Securities, described above. Although typically under the
terms of a custodial receipt a Portfolio is authorized to assert its
rights directly against the issuer of the underlying obligation, the
Portfolio may be required to assert through the custodian bank such
rights as may exist against the underlying issuer. Thus, in the event
the underlying issuer fails to pay principal and/or interest when due,
a Portfolio may be subject to delays, expenses and risks that are
greater than those that would have been involved if the Portfolio had
purchased a direct obligation of the issuer. In addition, if the trust
or custodial account in which the underlying security has been
deposited is determined to be an association taxable as a corporation,
instead of a non-taxable entity, the yield on the underlying security
would be reduced in respect of any taxes paid.

When-Issued and Delayed Delivery Securities. The Portfolio may
purchase securities, including U.S. government securities, on a when-
issued basis or may purchase or sell securities for delayed delivery.
In such transactions, delivery of the securities occurs beyond the
normal settlement period, but no payment or delivery is made by the
Portfolio prior to the actual delivery or payment by the other party to
the transaction. The purchase of securities on a when-issued or delayed
delivery basis involves the risk that the value of the securities
purchased will decline prior to the settlement date. The sale of
securities for delayed delivery involves the risk that the prices
available in the market on the delivery date may be greater than those
obtained in the sale transaction. When-issued and delayed delivery
transactions will be fully collateralized by segregated liquid assets.

Repurchase Agreements. The Portfolio may enter into repurchase
agreements. Under the terms of a typical repurchase agreement, the
Portfolio would acquire an underlying debt obligation for a relatively
short period (usually not more than one week) subject to an obligation
of the seller to repurchase, and the Portfolio to resell, the
obligation at an agreed upon price and time, thereby determining the
yield during the Portfolio's holding period. This arrangement results
in a fixed rate of return that is not subject to market fluctuations
during the Portfolio's holding period. The Portfolio may enter into
repurchase agreements with respect to U.S. Government Securities with
member banks of the Federal Reserve System and certain non-bank dealers
approved by the board of trustees. Under each repurchase agreement,
the selling institution is required to maintain the value of the
securities subject to the repurchase agreement at not less than their
repurchase price. The Portfolio's Subadviser, acting under the
supervision of the board of trustees, reviews on an ongoing basis the
value of the collateral and the creditworthiness of those non-bank
dealers with whom the Portfolio enters into repurchase agreements. The
Portfolio will not invest in a repurchase agreement maturing in more
than seven days if the investment, together with illiquid securities
held by the Portfolio, exceeds 15% of the Portfolio's total assets. In
entering into a repurchase agreement, a Portfolio bears a risk of loss
in the event that the other party to the transaction defaults on its
obligations and the Portfolio is delayed or prevented from exercising
its rights to dispose of the underlying securities, including the risk
of a possible decline in the value of the underlying securities during
the period in which the Portfolio seeks to assert its rights to them,
the risk of incurring expenses associated with asserting those rights
and the risk of losing all or a part of the income from the agreement.

Borrowing. Leverage increases investment risk as well as investment
opportunity. If the income and investment gains on securities
purchased with borrowed money exceed the interest paid on the
borrowing, the net asset value of the Portfolio's shares will rise
faster than would otherwise be the case. On the other hand, if the
income and investment gains fail to cover the cost, including interest,
of the borrowings, or if there are losses, the net asset value of the
Portfolio's shares will decrease faster than otherwise would be the
case.

Lending Portfolio Securities. Consistent with applicable regulatory
requirements, the Portfolio, may lend portfolio securities to brokers,
dealers and other financial organizations. The Portfolio will not lend
securities to Salomon Smith Barney unless the Portfolio has applied for
and received specific authority to do so from the SEC. The Portfolio's
loan of securities will be collateralized by cash, letters of credit or
U.S. Government Securities. The Portfolio will maintain the collateral
in an amount at least equal to the current market value of the loaned
securities. From time to time, the Portfolio may pay a part of the
interest earned from the investment of collateral received for
securities loaned to the borrower and/or a third party that is
unaffiliated with the Portfolio and is acting as a "finder." The
Portfolio will comply with the following conditions whenever it loans
securities: (i) the Portfolio must receive at least 100% cash
collateral or equivalent securities from the borrower; (ii) the
borrower must increase the collateral whenever the market value of the
securities loaned rises above the level of the collateral; (iii) the
Portfolio must be able to terminate the loan at any time; (iv) the
Portfolio must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned securities and
any increase in market value; (v) the Portfolio may pay only reasonable
custodian fees in connection with the loan; and (vi) voting rights on
the loaned securities may pass to the borrower except that, if a
material event adversely affecting the investment in the loaned
securities occurs, the Trust's Board of Trustees must terminate the
loan and regain the right to vote the securities.

Illiquid Securities. The Portfolio will not invest more than 15% of
its net assets in illiquid and other securities that are not readily
marketable. Repurchase agreements maturing in more than seven days will
be included for purposes of the foregoing limit. Securities subject to
restrictions on resale under the Securities Act of 1933, as amended
(the "1933 Act"), are considered illiquid unless they are eligible for
resale pursuant to Rule 144A or another exemption from the registration
requirements of the 1933 Act and are determined to be liquid by the
Subadvisor. The Subadvisors determine the liquidity of Rule 144A and
other restricted securities according to procedures adopted by the
Board of Trustees. The Board of Trustees monitors the Subadvisors'
application of these guidelines and procedures. The inability of the
Portfolio to dispose of illiquid investments readily or at reasonable
prices could impair the Portfolio's ability to raise cash for
redemptions or other purposes.

Temporary Investments. For temporary defensive purposes, during
periods when a Subadvisor of the Portfolio, in consultation with the
Manager, believes that pursuing the Portfolio's basic investment
strategy may be inconsistent with the best interests of its
shareholders, the Portfolio may invest its assets in the following
money market instruments: U.S. Government Securities (including those
purchased in the form of custodial receipts), repurchase agreements,
certificates of deposit and bankers' acceptances issued by U.S. banks
or savings and loan associations having assets of at least $500 million
as of the end of their most recent fiscal year and high quality
commercial paper. The Portfolio's U.S. dollar-denominated temporary
investments are managed by SSBC. The Portfolio also may hold a portion
of its assets in money market instruments or cash in amounts designed
to pay expenses, to meet anticipated redemptions or pending investment
in accordance with its objectives and policies. Any temporary
investments may be purchased on a when-issued basis. The Portfolio's
investment in any other short-term debt instruments would be subject to
the Portfolio's investment objectives and policies, and to approval by
the Trust's Board of Trustees.

INVESTMENT RESTRICTIONS

The investment restrictions numbered 1 through 7 below have been
adopted by the Trust as fundamental policies of the Portfolio. Under
the 1940 Act, a fundamental policy may not be changed without the vote
of a majority of the outstanding voting securities of a Portfolio,
which is defined in the 1940 Act as the lesser of (i) 67% or more of
the shares present at a Portfolio meeting, if the holders of more than
50% of the outstanding shares of the Portfolio are present or
represented by proxy, or (ii) more than 50% of the outstanding shares
of the Portfolio. Investment restrictions 8 through 11 may be changed
by a vote of a majority of the Board of Trustees at any time.

Under the investment restrictions adopted by the Portfolio:

1. The Portfolio will not deviate from the definition of a
"diversified company" as defined in the 1940 Act and rules thereunder.

2. The Portfolio will not invest more than 25% of its total
assets in securities, the issuers of which conduct their principal
business activities in the same industry. For purposes of this
limitation, U.S. government securities and securities of state or
municipal governments and their political subdivisions are not
considered to be issued by members of any industry.

3. Issue "senior securities" as defined in the 1940 Act, and the
rules, regulations and orders thereunder, except as permitted under the
1940 Act and the rules, regulations and orders thereunder.

4. The Portfolio will not borrow money, except that (a) the
Portfolio may borrow from banks for temporary or emergency (not
leveraging) purposes, including the meeting of redemption requests
which might otherwise require the untimely disposition of securities,
in an amount not exceeding 33 1/3% of the value of the Portfolio's
total assets (including the amount borrowed) valued at the lesser of
cost or market, less liabilities (not including the amount borrowed)
and (b) a Portfolio may, to the extent consistent with its investment
policies, enter into reverse repurchase agreements, forward roll
transactions and similar investment strategies and techniques.

5. The Portfolio will not make loans. This restriction does not
apply to: (a) the purchase of debt obligations in which a Portfolio may
invest consistent with its investment objectives and policies
(including participation interests in such obligations); (b) repurchase
agreements; and (c) loans of its portfolio securities.

6. The Portfolio will not purchase any securities on margin
(except for such short-term credits as are necessary for the clearance
of purchases and sales of Portfolio securities). For purposes of this
restriction, the deposit or payment by a Portfolio of underlying
securities and other assets in escrow and collateral agreements with
respect to initial or maintenance margin in connection with futures
contracts and related options and options on securities, indexes or
similar items is not considered to be the purchase of a security on
margin.

7. The Portfolio will not purchase or sell real estate, real
estate mortgages, commodities or commodity contracts, but this
restriction shall not prevent a Portfolio from (a) investing in and
selling securities of issuers engaged in the real estate business and
securities which are secured by real estate or interests therein; (b)
holding or selling real estate received in connection with securities
it holds; (c) trading in futures contracts and options on futures
contracts or (d) investing in or purchasing real estate investment
trust securities.

8. The Portfolio will not engage in the business of underwriting
securities issued by other persons, except to the extent that a
Portfolio may technically be deemed to be an underwriter under the
Securities Act of 1933, as amended, in disposing of Portfolio
securities.

9. The Portfolio will not invest in oil, gas or other mineral
leases or exploration or development programs.

10. The Portfolio will not make short sales of securities,
unless it owns or has the right to obtain securities equivalent in kind
and amount to the securities sold short and provided that transactions
in futures contracts and options are not deemed to constitute selling
securities short.

11. The Portfolio will not make investments for the purpose of
exercising control of management.

12. The Portfolio will not purchase any security if as a result
(unless the security is acquired pursuant to a plan of reorganization
or an offer of exchange) the Portfolio would own any securities of a
registered open-end investment company or more than 3% of the total
outstanding voting stock of any registered closed-end investment
company or more than 5% of the value of the Portfolio's total assets
would be invested in securities of any one or more registered closed-
end investment companies.

The percentage limitations contained in the restrictions listed above
(other than with respect to Number 4 above) apply at the time of
purchase of securities.

PORTFOLIO TRANSACTIONS

Decisions to buy and sell securities for a Portfolio are made by the
Subadvisor(s), subject to the overall review of the Manager and the
Board of Trustees. Although investment decisions for the Portfolio are
made independently from those of the other accounts managed by a
Subadvisor, investments of the type that the Portfolio may make also
may be made by those other accounts. When a Portfolio and one or more
other accounts managed by a Subadvisor are prepared to invest in, or
desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the
Subadvisor to be equitable to each. In some cases, this procedure may
adversely affect the price paid or received by a Portfolio or the size
of the position obtained or disposed of by a Portfolio.

Transactions on U.S. stock exchanges and some foreign stock exchanges
involve the payment of negotiated brokerage commissions. On exchanges
on which commissions are negotiated, the cost of transactions may vary
among different brokers. On most foreign exchanges, commissions are
generally fixed. No stated commission is generally applicable to
securities traded in U.S. over-the-counter markets, but the
underwriters include an underwriting commission or concession and the
prices at which securities are purchased from and sold to dealers
include a dealer's mark-up or mark-down. U.S. Government Securities
generally are purchased from underwriters or dealers, although certain
newly issued U.S. Government Securities may be purchased directly from
the U.S. Treasury or from the issuing agency or instrumentality.

In selecting brokers or dealers to execute securities transactions on
behalf of a Portfolio, its Subadvisor seeks the best overall terms
available. In assessing the best overall terms available for any
transaction, the Subadvisor will consider the factors it deems
relevant, including the breadth of the market in the security, the
price of the security, the financial condition and execution capability
of the broker or dealer and the reasonableness of the commission, if
any, for the specific transaction and on a continuing basis. In
addition, each Advisory Agreement between the Trust and the Subadvisor
authorizes the Subadvisor, in selecting brokers or dealers to execute a
particular transaction, and in evaluating the best overall terms
available, to consider the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of
1934) provided to the Portfolio and/or other accounts over which the
Subadvisor or its affiliates exercise investment discretion. The fees
under the Management Agreement and the Advisory Agreements,
respectively, are not reduced by reason of a Portfolio's Subadvisor
receiving brokerage and research services. The Board of Trustees of the
Trust will periodically review the commissions paid by a Portfolio to
determine if the commissions paid over representative periods of time
were reasonable in relation to the benefits inuring to the Portfolio.
Over-the-counter purchases and sales by a Portfolio are transacted
directly with principal market makers except in those cases in which
better prices and executions may be obtained elsewhere.

To the extent consistent with applicable provisions of the 1940 Act and
the rules and exemptions adopted by the SEC under the 1940 Act, the
Board of Trustees has determined that transactions for the Portfolio
may be executed through Salomon Smith Barney and other affiliated
broker-dealers if, in the judgment of the Subadvisor, the use of an
affiliated broker-dealer is likely to result in price and execution at
least as favorable as those of other qualified broker-dealers, and if,
in the transaction, the affiliated broker-dealer charges the Portfolio
a fair and reasonable rate.

The Portfolio will not purchase any security, including U.S. Government
Securities or Obligations, during the existence of any underwriting or
selling group relating thereto of which Salomon Smith Barney is a
member, except to the extent permitted by the SEC.

The Portfolio may use Salomon Smith Barney and other affiliated broker-
dealers as a commodities broker in connection with entering into
futures contracts and options on futures contracts if, in the judgment
of the Subadvisor, the use of an affiliated broker-dealer is likely to
result in price and execution at least as favorable as those of other
qualified broker-dealers, and if, in the transaction, the affiliated
broker-dealer charges the Portfolio a fair and reasonable rate. Salomon
Smith Barney has agreed to charge the Portfolio commodity commissions
at rates comparable to those charged by Salomon Smith Barney to its
most favored clients for comparable trades in comparable accounts.

PORTFOLIO TURNOVER

The Portfolio does not intend to seek profits through short-term
trading. Nevertheless, the Portfolio will not consider portfolio
turnover rate a limiting factor in making investment decisions.

The Portfolio's turnover rate is calculated by dividing the lesser of
purchases or sales of its portfolio securities for the year by the
monthly average value of the portfolio securities. Securities or
options with remaining maturities of one year or less on the date of
acquisition are excluded from the calculation. Because the Portfolio is
authorized to engage in transactions in options, it may experience
increased portfolio turnover under certain market conditions as a
result of its investment strategies. For instance, the exercise of a
substantial number of options written by the Portfolio (due to
appreciation of the underlying security in the case of call options or
depreciation of the underlying security in the case of put options)
could result in a turnover rate in excess of 100%. A portfolio turnover
rate of 100% would occur if all of the Portfolio's securities that are
included in the computation of turnover were replaced once during a
period of one year.

Certain practices that may be employed by the Portfolio could result in
high portfolio turnover. For example, portfolio securities may be sold
in anticipation of a rise in interest rates (market decline) or
purchased in anticipation of a decline in interest rates (market rise)
and later sold. In addition, a security may be sold and another of
comparable quality purchased at approximately the same time to take
advantage of what a Subadvisor believes to be a temporary disparity in
the normal yield relationship between the two securities. These yield
disparities may occur for reasons not directly related to the
investment quality of particular issues or the general movement of
interest rates, such as changes in the overall demand for, or supply
of, various types of securities. Portfolio turnover rates may vary
greatly from year to year as well as within a particular year and may
be affected by cash requirements for redemptions of the Portfolio's
shares as well as by requirements that enable the Portfolio to receive
favorable tax treatment.

INVESTMENT MANAGEMENT AND OTHER SERVICES

Manager; Subadvisors; Administrator. The Manager serves as investment
manager to the Trust pursuant to an investment management agreement
("Management Agreement"). Each Subadvisor serves as investment advisor
to the Portfolio pursuant to separate written agreements with the
Portfolio ("Advisory Agreements"), SSBC serves as administrator to the
Portfolio pursuant to a written agreement ("Administration Agreement").

The Portfolio bears its own expenses, which generally include all costs
not specifically borne by the manager, the Subadvisors, and SSBC.
Included among the Portfolio's expenses are costs incurred in
connection with the Portfolio's organization; investment management and
administration fees; fees for necessary professional and brokerage
services; fees for any pricing service; the costs of regulatory
compliance; and costs associated with maintaining the Trust's legal
existence and shareholder relations. As administrator, SSBC generally
oversees all aspects of the Trust's administration and operations
including furnishing the Trust with statistical and research data,
clerical help, accounting, data processing, bookkeeping, internal
auditing and legal services and certain other services required by the
Trust, prepares reports to the Trust's shareholders and prepares tax
returns, reports to and filings with the SEC and state blue sky
authorities. The Portfolio pays SSBC a fee for these services that is
computed daily and paid monthly at the annual rate of 0.20% of the
value of the Portfolio's average daily net assets.

SSBC was incorporated on March 12, 1968 under the laws of Delaware and
is a registered investment adviser. SSBC renders investment advice to
investment companies that had aggregate assets under management as of
August 31, 1999 in excess of [$_____ ] billion. The Consulting Group,
a division of SSBC, has extensive experience in providing investment
advisor selection services. The Consulting Group, through its
predecessors, was established in 1973 with the primary objective of
matching the investment needs of institutional and individual clients
with appropriate and qualified money management organizations
throughout the nation. In 1989, the Consulting Services Division was
restructured and its research and investment advisory evaluation
services functions were segregated and named the Consulting Group. The
Consulting Group's analysts, in the aggregate, have many years of
experience performing asset manager searches for institutional and
individual clients. These analysts rely on the Manager's comprehensive
database of money management firms, through which the Manager tracks
the historic and ongoing performance of over 800 of the more than
16,000 registered investment advisors, and over 300 on-sight evaluation
visits annually to advisors. As of August 31, 1999, the Consulting
Group provided services with respect to over $[ ] billion in client
assets representing more than [ ] separate accounts under a variety
of programs designed for individual and institutional investors.

The Manager and the Subadvisors each pay the salaries of all officers
and employees who are employed by it and the Trust, and the Manager
maintains office facilities for the Trust. The Manager and the
Subadvisors bear all expenses in connection with the performance of
their respective services under the Management Agreement, the Advisory
Agreements, and the Administration Agreement.

As noted in the Prospectus, subject to the supervision and direction of
the Manager and, ultimately, the Board of Trustees, each Subadvisor
manages the securities held by the Portfolio it serves in accordance
with the Portfolio's stated investment objectives and policies, makes
investment decisions for the Portfolio and places orders to purchase
and sell securities on behalf of the Portfolio.

Subject to the supervision and direction of the Board of Trustees, the
Manager provides to the trust investment management evaluation services
principally by performing initial due diligence on prospective
Subadvisors for the Portfolio and thereafter monitoring each
Subadvisor's performance through quantitative and qualitative analysis
as well as periodic in-person, telephonic and written consultations
with Subadvisors. In evaluating prospective Subadvisors, the Manager
considers, among other factors, each Subadvisor's level of expertise;
relative performance and consistency of performance over a minimum
period of five years; level of adherence to investment discipline or
philosophy, personnel, facilities, financial strength and quality of
service and client communications. The Manager has responsibility for
communicating performance expectations and evaluations to Subadvisors
and ultimately recommending to the Board of Trustees whether
Subadvisors' contracts should be renewed, modified or terminated. The
Manager provides written reports to the Board of Trustees regarding the
results of its evaluations and monitoring functions. The Manager is
also responsible for conducting all operations of the Trust except
those operations contracted to the Subadvisor, custodian, transfer
agent or administrator.

Investors should be aware that the Manager may be subject to a conflict
of interest when making decisions regarding the retention and
compensation of particular Subadvisors. However, the Manager's
decisions, including the identity of the Subadvisor and the specific
amount of the Manager's compensation to be paid to the Subadvisor and
the specific amount of the Manager's compensation to be paid to the
Subadvisor, are subject to review and approval by a majority of the
Board of Trustees and separately by a majority of the Trustees who are
not affiliated with the manager or any of its affiliates.

Investors should also be aware that through Smith Barney Advisory
Services, the Consulting Group serves as investment adviser to each
participant in such service and receives a fee from each participant
that does not vary based on the Portfolios of the Trust recommended for
the participant's investments. At the same time, the Consulting Group
serves as the Trust's Manager with responsibility for identifying,
retaining, supervising and compensating each Portfolio's Subadvisor and
receives a fee from each Portfolio of the Trust. The portion of such
fee that is retained by the Manager varies based on the Portfolio
involved. Consequently, the Consulting Group, when making asset
allocation recommendations for participants in Smith Barney Advisory
Services, may be presented with a conflict of interest as to the
specific portfolios of the trust recommended for investment. The
Consulting Group, however, is subject to and intends to comply fully
with standards of fiduciary duty that require that it act solely in the
best interest of the participant when making investment
recommendations.

The Trust has received an exemption (the "Exemption") from certain
provisions of the 1940 Act which would otherwise require the Manager to
obtain formal shareholder approval prior to engaging and entering into
investment advisory agreements with Subadvisors. The Exemption is
based on among other things: (1) the Manager will select, monitor,
evaluate and allocate assets to, the Subadvisors and ensure that the
Subadvisors comply with a Portfolio's investment objective, policies
and restrictions; (2) shares of a Portfolio relying on the Exemption
will not be subject to any sales loads or redemption fees or other
charges for redeeming shares; (3) the Trust will provide to
shareholders certain information about a new Subadvisor and its
investment advisory contract within 90 days of the engagement of new
Subadvisor; (4) the Trust will disclose in its prospectus the terms of
the Exemption; and (5) the Trustees, including a majority of the "non-
interested" Trustees, must approve each investment advisory contract in
the manner required under the 1940 Act. Any changes to the Management
Agreement between the Trust and the Manager still require shareholder
approval.

Counsel and Auditors

Willkie Farr & Gallagher serves as counsel to the Trust. Stroock &
Stroock & Lavan, LLP serves as counsel to the trustees who are not
"interested persons" of the Trust.

KPMG LLP, 757 Third Avenue, New York, New York 10017, currently serves
as the independent auditors of the Trust and rendered an opinion on the
Trust's most recent financial statements and financial highlights.

Organization of the Trust. The Trust has been organized as an
unincorporated business trust under the laws of The Commonwealth of
Massachusetts pursuant to a Master Trust Agreement dated April 12,
1991, as amended from time to time (the "Trust Agreement").

In the interest of economy and convenience, certificates representing
shares in the Trust are not physically issued. PNC Bank, N.A., the
Trust's custodian, maintains a record of each shareholder's ownership
of Trust shares. Shares do not have cumulative voting rights, which
means that holders of more than 50% of the shares voting for the
election of Trustees can elect all Trustees. Shares are transferable,
but have no preemptive, conversion or subscription rights. Shareholders
generally vote on a Trust-wide basis, except with respect to
continuation of the Advisory Agreements, in which case shareholders
vote by Portfolio.

Massachusetts law provides that shareholders could, under certain
circumstances, be held personally liable for the obligations of the
Trust. The Trust Agreement disclaims shareholder liability for acts or
obligations of the Trust, however, and requires that notice of the
disclaimer be given in each agreement, obligation or instrument entered
into or executed by the Trust or a Trustee. The Trust Agreement
provides for indemnification from the Trust's property for all losses
and expenses of any shareholder held personally liable for the
obligations of the Trust. Thus, the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to
circumstances in which the Trust would be unable to meet its
obligations, a possibility that the Trust's management believes is
remote. Upon payment of any liability incurred by the Trust, the
shareholder paying the liability will be entitled to reimbursement from
the general assets of the Trust. The Trustees intend to conduct the
operations of the Trust in a manner so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities of the Trust.

PURCHASE OF SHARES

Purchases of shares of the Portfolio through an Advisory Service must
be made through a brokerage account maintained with Salomon Smith
Barney. Payment for Portfolio shares must be made by check directly to
Salomon Smith Barney or to a broker that clears securities transactions
through Salomon Smith Barney. No brokerage account or inactivity fee
is charged in connection with a brokerage account through which an
investor purchases shares of a Portfolio.

Shares of the Portfolio are available exclusively to participants in
Advisory Services and are generally designed to relieve investors of
the burden of devising an asset allocation strategy to meet their
individual needs as well as selecting individual investments within
each asset category among the myriad choices available. Advisory
Services generally provide investment advice in connection with
investments among the Trust's Portfolios by identifying the investor's
risk tolerances and investment objectives through evaluation of an
investment questionnaire; identifying and recommending in writing an
appropriate allocation of assets among the Portfolios that conform to
those tolerances and objectives in a written recommendation; and
providing on a periodic basis, a written monitoring report to the
investor containing an analysis and evaluation of an investor's account
and recommending any appropriate changes in the allocation of assets
among the Portfolios. Usually under an Advisory Service, all
investment decisions ultimately rest with the investor and investment
discretion is not given to the investment adviser.

The TRAK(r) Personalized Investment Advisory Service ("TRAK") sponsored
by Salomon Smith Barney is one such advisory service. Under the TRAK
program the Consulting Group in its capacity as investment adviser to
participants in TRAK generally directly provides to investors asset
allocation recommendations and related services with respect to the
Portfolios based on an evaluation of an investor's investment objective
and risk tolerances. Shares of the Portfolios are offered for purchase
and redemption at their respective net asset value next determined,
without imposition of any initial or contingent deferred sales charge
except that the Consulting Group is paid directly by the investors
purchasing Portfolio shares based on the recommendation of investment
advisors other than the Consulting Group, or who contract with the
Consulting Group for services other than those described above, pay, in
lieu of TRAK charges, different fees for different levels of services
as agreed upon with their investment advisers.

REDEMPTION OF SHARES

Detailed information on how to redeem shares of the Portfolio is
included in the Prospectus. The right of redemption of shares of the
Portfolio may be suspended or the date of payment postponed (i) for any
periods during which the New York Stock Exchange, Inc. (the "NYSE") is
closed (other than for customary weekend and holiday closings), (ii)
when trading in the markets the Portfolio normally utilizes is
restricted, or an emergency, as defined by the rules and regulations of
the SEC, exists making disposal of the Portfolio's investments or
determination of its net asset value not reasonably practicable or
(iii) for such other periods as the SEC by order may permit for the
protection of the Portfolio's shareholders.

REDEMPTIONS IN KIND

If the Board of Trustees determines that it would be detrimental to the
best interests of a Portfolio's shareholders to make a redemption
payment wholly in cash, the Portfolio may pay, in accordance with rules
adopted by the SEC, any portion of a redemption in excess of the lesser
of $250,000 or 1% of the Portfolio's net assets by a distribution in
kind of readily marketable portfolio securities in lieu of cash.
Redemptions failing to meet this threshold must be made in cash.
Shareholders receiving distributions in kind of portfolio securities
may incur brokerage commissions when subsequently disposing of those
securities.

NET ASSET VALUE

The Portfolio's net asset value per share is calculated by SSBC on each
day, Monday through Friday, except days on which the NYSE is closed.
The NYSE is currently scheduled to be closed on New Year's Day, Martin
Luther King Junior Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas, and on the
preceding Friday when one of those holidays falls on a Saturday or on
the subsequent Monday when one of those holidays falls on a Sunday. On
those days, securities held by the Portfolio may nevertheless be
actively traded and the value of the Portfolio's shares could be
significantly affected.

Net asset value per share is determined as of the close of trading on
the NYSE and is computed by dividing the value of the Portfolio's net
assets by the total number of its shares outstanding. Securities that
are primarily traded on foreign exchanges are generally valued for
purposes of calculating the Portfolio's net asset value at the
preceding closing values of the securities on their respective
exchanges, except that, when an occurrence subsequent to the time a
value was so established is likely to have changed that value, the fair
market value of those securities will be determined by consideration of
other factors by or under the direction of the board of trustees. A
security that is primarily traded on a domestic or foreign stock
exchange is valued at the last sale price on that exchange as reported
to the Portfolio or, if no sales occurred during the day, these
investments are quoted at the mean between the current bid and ask
prices. A security that is listed or traded on more than one exchange
is valued for purposes of calculating the Portfolio's net asset value
at the quotation on the exchange determined to be the primary market
for the security. Debt securities of U.S. issuers (other than U.S.
Government Securities and short-term investments) are valued by SSBC
after consultation with an independent pricing service. When, in the
judgment of the pricing service, quoted bid prices are available and
are representative of the bid side of the market, these investments are
valued at the mean between the quoted bid and ask prices. Investments
for which no readily obtainable market quotations are available, in the
judgment of the pricing service, are carried at fair value as
determined by the pricing service. The procedures of the pricing
service are reviewed periodically by the officers of the Trust under
the general supervision and responsibility of the board of trustees.
An option that is written by the Portfolio is generally valued at the
last sale price or, in the absence of the last sale price, the last
offer price. An option purchased by the Portfolio is generally valued
at the last sale price or, in the absence of the last sale price, the
last bid price. The value of a futures contract is equal to the
unrealized gain or loss on the contract that is determined by marking
the contract to the current settlement price for a like contract on the
valuation date of the futures contract. A settlement price may not be
used if the market makes a limit move with respect to a particular
futures contract or if the securities underlying the futures contract
experience significant price fluctuations after the determination of
the settlement price. When a settlement price cannot be used, futures
contracts will be valued at their fair market value as determined by or
under the direction of the board of trustees.

All assets and liabilities initially expressed in foreign currency
values will be converted into U.S. dollar values at the mean between
the bid and offered quotations of the currencies against U.S. dollars
as last quoted by a recognized dealer. If the bid and offered
quotations are not available, the rate of exchange will be determined
in good faith by the board of trustees. In carrying out the board's
valuation policies, SSBC may consult with an independent pricing
service retained by the trust.

The valuation of the securities held by the Portfolio in U.S. dollar-
denominated securities with less than 60 days to maturity are based
upon their amortized cost, which does not take into account unrealized
capital gains or losses. Amortized cost valuation involves initially
valuing an instrument at its cost and, thereafter, assuming a constant
amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the
instrument. While this method provides certainty in valuation, it may
result in periods during which value, as determined by amortized cost,
is higher or lower than the price that the Portfolio would receive if
it sold the instrument.

DETERMINATION OF PERFORMANCE

From time to time, the Trust may quote the Portfolio's yield or total
return in advertisements or in reports and other communications to
shareholders.

Yield and Equivalent Taxable Yield

For a Portfolio, the 30-day yield figure described in the Prospectus is
calculated according to a formula prescribed by the SEC, expressed as
follows:

YIELD = 2[(a - b + 1)6 - 1]
cd
Where:
a = dividends and interest earned during the period.

b= expenses accrued for the period (net of reimbursement),
including a ratable portion of the maximum annual fee for participation
in TRAK.

c= the average daily number of shares outstanding during the
period that were entitled to receive dividends.

d= the maximum offering price per share on the last day of the
period.

For the purpose of determining the interest earned (variable "a"
in the formula) on debt obligations that were purchased by the
Portfolio at a discount or premium, the formula generally calls for
amortization of the discount or premium; the amortization schedule will
be adjusted monthly to reflect changes in the market values of the debt
obligations.

A Portfolio's equivalent taxable 30-day yield is computed by dividing
the portion of the Portfolio's 30-day yield that is tax exempt by one
minus a stated income tax rate and adding the product to any portion of
the Portfolio's yield that is not tax exempt.

Investors should recognize that in periods of declining interest rates,
a Portfolio's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates will tend to be
somewhat lower. In addition, when interest rates are falling, the
inflow of net new money to a Portfolio from the continuous sale of its
shares will likely be invested in instruments producing lower yields
than the balance of its portfolio of securities, thereby reducing the
current yield of the Portfolio. In periods of rising interest rates the
opposite can be expected to occur.

Average Annual Total Return

From time to time, the Trust may advertise the Portfolio's "average
annual total return" over various periods of time. This total return
figure shows the average percentage change in value of an investment in
the Portfolio from the beginning date of the measuring period to the
ending date of the measuring period and is reduced by the maximum Smith
Barney Advisory Service fee during the measuring period. The figure
reflects changes in the price of the Portfolio's shares and assumes
that any income, dividends and/or capital gains distributions made by
the Portfolio during the period are reinvested in shares of the
Portfolio. Figures will be given for recent one-, five- and ten-year
periods (if applicable) and may be given for other periods as well
(such as from commencement of the Portfolio's operations or on a year-
by-year basis). Aggregate total returns also may be shown by means of
schedules, charts or graphs, and may indicate subtotals of the various
components of total return (that is, the change in value of initial
investment, income dividends and capital gains distributions).

In reports or other communications to shareholders or in advertising
material, the Portfolio may quote total return figures that do not
reflect Smith Barney Advisory Service fees (provided that these figures
are accompanied by standardized total return figures calculated as
described above), as well as compare its performance with that of other
mutual funds as listed in the rankings prepared by Lipper Analytical
Services, Inc. or similar independent services that monitor the
performance of mutual funds or with other appropriate indices of
investment securities. The performance information also may include
evaluations of the Portfolio published by nationally recognized ranking
services and by financial publications that are nationally recognized,
such as Barron's, Business Week, CDA Investment Technologies, Inc.,
Changing Times, Forbes, Fortune, Institutional Investor, Investor's
Daily, Kiplinger's Personal Finance Magazine, Money, Morningstar Mutual
Fund Values, The New York Times, USA Today and The Wall Street Journal.

The Portfolio's average annual total return figures are computed
according to a formula prescribed by the SEC, expressed as follows:

P(1+T)n = ERV

Where:
P= a hypothetical initial payment of $1,000
T= average annual total return, including the effect of
the maximum annual fee for participation in TRAK.
n= number of years
ERV= Ending Redeemable Value of a hypothetical $1,000
investment made at the beginning of a 1-, 5- or 10-
year period at the end of a 1-, 5- or 10-year period
(or fractional portion thereof), assuming reinvestment
of all dividends and distributions and the effect of
the maximum annual fee for participation in TRAK.

The ERV assumes complete redemption of the hypothetical investment at
the end of the measuring period. A Portfolio's net investment income
changes in response to fluctuations in interest rates and the expenses
of the Portfolio.

A Portfolio's net investment income changes in response to fluctuations
in interest rates and the expenses of the Portfolio. Consequently, the
given performance quotations should not be considered as representative
of the Portfolio's performance for any specified period in the future.

A Portfolio's performance will vary from time to time depending upon
market conditions, the composition of its portfolio and its operating
expenses. Consequently, any given performance quotation should not be
considered representative of a Portfolio's performance for any
specified period in the future. In addition, because performance will
fluctuate, it may not provide a basis for comparing an investment in
the Portfolio with certain bank deposits or other investments that pay
a fixed yield for a stated period of time. Investors comparing a
Portfolio's performance with that of other mutual funds should give
consideration to the quality and maturity of the respective investment
companies' portfolio securities.

Comparative performance information may be used from time to time in
advertising the Portfolios' shares, including data from Lipper
Analytical Services, Inc., Standard & Poor's 500 Composite Stock Price
Index, the Dow Jones Industrial Average and other industry
publications.

TAXES

The following is a summary of certain federal income tax considerations
that may affect the Portfolio and its shareholders. In addition to the
considerations described below, there may be other federal, state,
local or foreign tax applications to consider. The summary does not
address all of the potential federal income tax consequences that may
be applicable to the Portfolio or to all categories of investors, some
of which may be subject to special tax rules. The summary is not
intended as a substitute for individual tax advice and investors are
urged to consult their own tax advisors as to the tax consequences of
an investment in the Portfolio.

The Portfolio intends to qualify in each year as a separate "regulated
investment company" under the Internal Revenue Code of 1986, as amended
(the "Code") by complying with certain requirements regarding the
sources and distribution of its income and the diversification of its
assets. Provided that the Portfolio (i) is a regulated investment
company and (ii) distributes to its shareholders at least 90% of its
taxable net investment income (including, for this purpose, any excess
of its net short-term capital gain over its net long-term capital loss)
for a taxable year and 90% of its tax exempt interest income (reduced
by certain expenses for that year), it will not be liable for federal
income taxes to the extent its taxable net investment income and its
net realized long-term and short-term capital gains, if any, are
distributed to its shareholders in compliance with the Code's timing
and other requirements.

If, in any taxable year, the fund fails to qualify as a regulated
investment company under the Code or fails to meet the distribution
requirement, it would be taxed in the same manner as an ordinary
corporation and distributions to its shareholders would not be
deductible by the fund in computing its taxable income. In addition,
in the event of a failure to qualify, the fund's distributions, to the
extent derived from the fund's current or accumulated earnings and
profits would constitute dividends (eligible for the corporate
dividends-received deduction) which are taxable to shareholders as
ordinary income, even though those distributions might otherwise (at
least in part) have been treated in the shareholders' hands as tax-
exempt interest. If the fund fails to qualify as a regulated
investment company in any year, it must pay out its earnings and
profits accumulated in that year in order to qualify again as a
regulated investment company. In addition, if the fund failed to
qualify as a regulated investment company for a period greater than one
taxable year, the fund may be required to recognize any net built-in
gains (the excess of the aggregate gains, including items of income,
over aggregate losses that would have been realized if it had been
liquidated) in order to qualify as a regulated investment company in a
subsequent year.

In order to avoid the application of a 4% nondeductible excise tax on
certain undistributed amounts of ordinary income and capital gains, the
Portfolio may make an additional distribution shortly before or shortly
after December 31 in each year of any undistributed ordinary income or
capital gains. The Portfolio generally will seek to pay any additional
dividends and distributions necessary to avoid the application of this
tax.

As described above, the Portfolio may invest in certain types of
warrants, foreign currencies, forward contracts, options and futures
contracts. The Portfolio anticipates that these investment activities
will not prevent it from qualifying as a regulated investment company.

The Portfolio's transactions in foreign currencies, forward contracts,
options and futures contracts (including options and futures contracts
on foreign currencies) will be subject to special provisions of the
Code that, among other things, may affect the character of gains and
losses realized by the Portfolio (i.e., may affect whether gains or
losses are ordinary or capital and, if capital, the extent to which
they are long-term or short-term), accelerate recognition of income to
the Portfolio and defer Portfolio losses. These rules could therefore
affect the character, amount and timing of distributions to
shareholders. These provisions also (i) will require the Portfolio to
mark-to-market certain types of positions in its portfolio (i.e., treat
them as if they were closed out), and (ii) may cause the Portfolio to
recognize income without receiving cash with which to pay dividends or
make distributions in amounts necessary to satisfy the distribution
requirements for avoiding income and excise taxes that are referred to
above. The Portfolio will monitor its transactions, will make the
appropriate tax elections, if any, and will make the appropriate
entries in its books and records when it acquires any foreign currency,
forward contract, option, futures contract or hedged investment in
order to mitigate the effect of these rules and seek to prevent
disqualification of the Portfolio as a regulated investment company.

As a general rule, the Portfolio's gain or loss on a sale or exchange
of an investment will be a long-term capital gain or loss if the
Portfolio has held the investment for more than one year and will be a
short-term capital gain or loss if it has held the investment for one
year or less. Gains or losses on the sale of debt securities
denominated in a foreign currency may be recharacterized as ordinary
income or losses, as described below.

Dividends or other income (including, in some cases, capital gains)
received by the Portfolio from investments in foreign securities may be
subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce
or eliminate such taxes in some cases. The Portfolio will not be
eligible to elect to treat any foreign taxes paid by it as paid by its
shareholders, who therefore will not be entitled to deductions or
credits for such taxes on their own tax returns.

The Portfolio may be required to treat amounts as taxable income or
gain, subject to the distribution requirements referred to above, even
though no corresponding amounts of cash are received concurrently, as a
result of (1) mark to market, constructive sale or other rules
applicable to passive foreign investment companies or partnerships or
trusts in which the Portfolio invests or to certain options, futures or
forward contracts, or "appreciated financial positions" or (2) the
inability to obtain cash distributions or other amounts due to currency
controls or restrictions on repatriation imposed by a foreign country
with respect to the Portfolio's investments (including through
depositary receipts) in issuers in such country or (3) tax rules
applicable to debt obligations acquired with "original issue discount,"
including zero-coupon or deferred payment bonds and pay-in-kind debt
obligations, or to market discount if an election is made with respect
to such market discount. The Portfolio may therefore be required to
obtain cash to be used to satisfy these distribution requirements by
selling securities at times that it might not otherwise be desirable to
do so or borrowing the necessary cash, thereby incurring interest
expenses.

Under Section 988 of the Code, gains or losses attributable to
fluctuations in exchange rates between the time the Portfolio accrues
income or receivables or expenses or other liabilities denominated in a
foreign currency and the time the Portfolio actually collects such
income or pays such liabilities are generally treated as ordinary
income or ordinary loss. Similarly, gains or losses on foreign
currency, foreign currency forward contracts, certain foreign currency
options or futures contracts and the disposition of debt securities
denominated in foreign currency, to the extent attributable to
fluctuations in exchange rates between the acquisition and disposition
dates, are also treated as ordinary income or loss.

The Portfolio is permitted to carry forward any unused capital losses
to be utilized to offset its capital gains realized during the eight-
year period following the year in which the losses arose, which will
reduce the net realized capital gains (if any) required to be
distributed to shareholders for those years.

Dividends and Distributions

For federal income tax purposes, dividends declared by the Portfolio in
October, November or December as of a record date in such a month and
which are actually paid in January of the following year will be
taxable to shareholders as if they were paid on December 31 of the year
in which they are declared rather than in the year in which
shareholders actually receive the dividends.

As a general rule, a shareholder's gain or loss on a redemption or
other disposition of Portfolio shares that is treated as a sale under
the Code will be a long-term capital gain or loss if the shareholder
has held his or her Portfolio shares for more than one year and will be
a short-term capital gain or loss if he or she has held his or her
Portfolio shares for one year or less.

The Portfolio may realize net long-term capital gains. Distributions of
the excess of net long-term capital gain over net short-term capital
loss ("capital gain dividends" if any) will be taxable to shareholders
as long-term capital gains, regardless of whether received in cash or
reinvested in additional shares and how long a shareholder has held
Portfolio shares. If a shareholder receives a capital gain dividend
with respect to any share and redeems, sells or otherwise disposes of
the share before it has been held for more than six months, then any
loss, to the extent of the capital gain dividend, will be treated as a
long-term capital loss. Additionally, any loss realized on a
redemption, exchange or other disposition of Portfolio shares generally
will be disallowed to the extent the shares disposed of are replaced,
including replacement through the reinvesting of dividends and capital
gains distributions in the Portfolio, within a 61-day period beginning
30 days before and ending 30 days after the disposition of the shares.

Dividends paid from net investment income and distributions of any
excess of net short-term capital gain over net long-term capital loss
are taxable to shareholders as ordinary income, regardless of how long
shareholders have held their Portfolio shares and whether such
dividends and distributions are received in cash or reinvested in
additional Portfolio shares. Dividends paid by the Portfolio declared
from net investment income and are attributable to qualifying dividends
received by the Portfolio from domestic corporations may qualify for
the federal dividends-received deduction for corporations.

Each shareholder will receive after the close of the calendar year an
annual statement as to the federal income tax status of his or her
dividends and distributions for the prior calendar year. Each
shareholder will also receive, if appropriate, various written notices
after the close of the Portfolio's prior taxable year as to the federal
income tax status of the Portfolio during the Portfolio's prior taxable
year. Shareholders should consult their tax advisors as to any state
and local taxes that may apply to these dividends and distributions and
the possible availability of an exemption for dividends paid by a
Portfolio attributable to interest the Portfolio earns from U.S.
Government obligations.

If the Portfolio is the holder of record of any stock on the record
date for any dividends payable with respect to the stock, these
dividends will be included in the Portfolio's gross income as of the
later of (i) the date the stock became ex-dividend with respect to the
dividends (i.e., the date on which a buyer of the stock would not be
entitled to receive the declared, but unpaid, dividends) or (ii) the
date the Portfolio acquired the stock. Accordingly, in order to satisfy
its income distribution requirements, the Portfolio may be required to
pay dividends based on anticipated earnings, and shareholders may
receive dividends in an earlier year than would otherwise be the case.

Investors considering buying shares of the Portfolio on or just prior
to the record date for a taxable dividend or capital gain distribution
should be aware that even if the net asset value of the Portfolio's
shares is reduced below the investor's cost as a result of the
distribution, the amount of the forthcoming dividend or distribution
payment will be a taxable dividend or distribution payment even though
it may represent a return of invested capital.

If a shareholder fails to furnish a correct taxpayer identification
number, fails to report fully dividend or interest income, or fails to
certify that he or she has provided a correct taxpayer identification
number and that he or she is not subject to "backup withholding," then
the shareholder may be subject to a 31% "backup withholding" tax with
respect to (i) dividends and distributions and (ii) the proceeds of any
redemptions of Portfolio shares. An individual's taxpayer
identification number is his or her social security number. The 31%
"backup withholding" tax is not an additional tax and may be credited
against a taxpayer's federal income tax liability. Distributions to
nonresident aliens and foreign entities may be subject to different tax
rules, including other possible withholding taxes.

The foregoing is only a summary of certain tax considerations generally
affecting the Portfolio and its shareholders, and is not intended as a
substitute for careful tax planning. Shareholders are urged to consult
their tax advisors with specific reference to their own tax situations,
including their state and local tax liabilities.

DISTRIBUTOR

CFBDS, Inc., 21 Milk Street, 5th Floor, Boston, MA 02109 serves as the
Portfolio's distributor on a best efforts basis pursuant to a written
agreement, which was approved by the Trustees of the Trust.

CUSTODIANS AND TRANSFER AGENT

PNC Bank National Association ("PNC") and The Chase Manhattan Bank
("Chase") serve as the custodians for the Trust. The assets of the
Trust are held under bank custodianship in accordance with the 1940
Act. Under their custody agreements with the Trust, PNC and Chase are
authorized to establish separate accounts for foreign securities owned
by the Portfolios to be held with foreign branches of U.S. banks as
well as certain foreign banks and securities depositories as sub-
custodians of assets owned by the Portfolios. For its custody services,
PNC and Chase receive monthly fees charged to a Portfolio based upon
the month-end, aggregate net asset value of the Portfolio plus certain
charges for securities transactions. PNC and Chase are also reimbursed
by the Portfolio for out-of-pocket expenses including the costs of any
foreign and domestic sub-custodians.

First Data Investors Services Group Inc., ("First Data"), a subsidiary
of First Data Corporation, serves as the Trust's transfer agent. For
its services as transfer agent, First Data receives fees charged to a
Portfolio at an annual rate based upon the number of shareholder
accounts maintained during the year. First Data is also reimbursed by
the Portfolio for out-of-pocket expenses.

APPENDIX - RATINGS OF DEBT OBLIGATIONS

BOND AND NOTE RATINGS

Moody's Investors Services, Inc.

Aaa - Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.

Aa - Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in "Aaa"
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present that make the long term
risks appear somewhat larger than in "Aaa" securities.

A - Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present that suggest a susceptibility to
impairment sometime in the future.

Baa - Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.

Ba - Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B - Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.

Caa - Bonds which are rated "Caa" are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest

Ca - Bonds which are rated "Ca" represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.

C - Bonds which are rated "C" are the lowest class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Con (..)- Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally.
These are bonds secured by (a) earnings of projects under construction,
(b) earnings of projects unseasoned in operating experience, (c) rentals
which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination
of basis of condition.

Note: The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.

Standard & Poor's Ratings Group

AAA - Debt rated "AAA" has the highest rating assigned by Standard &
Poor's Ratings Group ("S&P"). Capacity to pay interest and repay
principal is extremely strong.

AA - Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small
degree.

A - Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in
higher rated categories.

BBB - Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.

BB, B, CCC, CC, C - Debt rated "BB", "B", "CCC", "CC" and "C" is
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the
terms of the obligation. "BB" indicates the lowest degree of
speculation and "C" the highest degree of speculation. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.

Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by
the addition of a plus or minus to show relative standing within the
major rating categories.

Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of
the project being financed by the debt being rated and indicates that
payment of debt service requirements is largely or entirely dependent
upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion. The investor should exercise judgment
with respect to such likelihood and risk.

L - The letter "L" indicates that the rating pertains to the principal
amount of those bonds where the underlying deposit collateral is fully
insured by the Federal Savings & Loan Insurance Corp. or the Federal
Deposit Insurance Corp.

+ Continuance of the rating is contingent upon S&P's receipt of closing
documentation confirming investments and cash flow.

* Continuance of the rating is contingent upon S&P's receipt of an
executed copy of the escrow agreement.

NR- Indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.

COMMERCIAL PAPER RATINGS

Moody's Investors Service, Inc.

Issuers rated "Prime-l" (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment will normally be evidenced by the following
characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative
capitalization structures with moderate reliance on debt and ample asset
protection; broad margins in earnings coverage of fixed financial
charges and high internal cash generation; well-established access to a
range of financial markets and assured sources of alternate liquidity.

Issuers rated "Prime-2" (or related supporting institutions) have strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to
a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.

Standard & Poor's Ratings Group

A-1 - This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issuers
determined to possess overwhelming safety characteristics will be noted
with a plus (+) sign designation.

A-2 - Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for
issues designated A-1.

4
g:/fundacctg/legal/funds/trak/1999/secdocs/saimultisec

PART C

Item 23. Exhibits

(a)(1) Master Trust Agreement is incorporated by reference to
Registrant's Registration Statement on Form N-1A as filed with the
Securities and Exchange Commission (the "Commission") on May
24, 1991 (the "Registration Statement").

(a)(2) Amendment No. 1 to Master Trust Agreement is
incorporated by reference to the Registration Statement.

(a)(3) Amendment No. 2 to Master Trust Agreement is
incorporated by reference to Pre-Effective Amendment
No. 1 to the Registration Statement on Form N-1A as
filed with the Commission on July 22, 1991 ("Pre-Effective
Amendment No. 1").

(a)(4) Amendment No. 3 to Master Trust Agreement is
incorporated by reference to Post-Effective Amendment
No. 6 ("Post-Effective Amendment No. 6") to the Registration
Statement on Form N-1A filed on March 18, 1994.

(b)(1) By-Laws are incorporated by reference to the
Registration Statement.

(b)(2) Amended and Restated By-Laws are incorporated by
reference to Pre-Effective Amendment No. 1.

(d)(1) Investment Management Agreement dated July 30, 1993
between the Registrant and The Consulting Group, a division of Smith,
Barney Advisers, Inc., is incorporated by reference to Post-Effective
Amendment No. 3 ("Post-Effective Amendment No. 3") to the
Registration Statement on Form N-1A filed with the Commission
on October 29, 1993.

(d)(2) Investment Advisory Agreement dated July 30, 1993
between Smith, Barney Advisers, Inc. and Smith Affiliated Capital Corp.
relating to Registrant's Municipal Bond Investments Portfolio is
incorporated by reference to Post-Effective Amendment No. 3.

(d)(3) Investment Advisory Agreement dated July 30, 1993
between Smith, Barney Advisers, Inc. and Atlantic Portfolio Analytics &
Management, Inc. relating to Registrant's Mortgage Backed Investments
Portfolio is incorporated by reference to Post-Effective Amendment No. 3.

(d)(4) Investment Advisory Agreement dated January 4, 1999
between Mutual Management Corp. and Seix Investment Advisors Inc.
relating to Registrant's Balanced Investments Portfolio will
be filed by amendment.

(d)(4) Investment Advisory Agreement dated January 4, 1999
between Mutual Management Corp. and Laurel Capital Advisors, LLP
relating to Registrant's Balanced Investments Portfolio will
be filed by amendment.

(d)(6) Investment Advisory Agreement dated April 1, 1998
between Smith, Barney Advisers, Inc. and Standish, Ayer & Wood, Inc.
relating to Registrant's Intermediate Fixed Income Investments Portfolio
is to be filed by amendment.

(d)(7) Investment Advisory Agreement dated July 30, 1993
between Smith, Barney Advisers, Inc. and Julius Baer Investment Management
Inc. relating to Registrant's International Fixed Income Investments
Portfolio is incorporated by reference to Post-Effective Amendment No. 3.

(d)(8) Investment Advisory Agreement dated April 1, 1998
between Mutual Management Corp. and NFJ Investment Group Inc. relating
to Registrant's Small Capitalization Value Equity Investments
Portfolio is to be filed by amendment.

(d)(9) Investment Advisory Agreement dated October 1, 1998 between
Mutual Management Corp. (Formerly Smith Barney Mutual Funds
Management Inc.) and The Boston Company
Asset Management LLC relating to Registrant's Large Capitalization Value
Equity Investments Portfolio is to be filed by amendment.

(d)(10) Investment Advisory Agreement dated March 10, 1995
between Smith Barney Mutual Funds Management Inc. and Parametric
Portfolio Associates, Inc. relating to Registrant's Large Capitalization
Value Equity Investments Portfolio is to be filed by amendment.

(d)(11) Investment Advisory Agreement
dated January 11, 1999 between Mutual Management Corp. and Provident
Investment Counsel relating to Registrant's Large Capitalization Growth
Investments Portfolio is to be filed by amendment.

(d)(12) Investment Advisory Agreement dated October 1, 1998
between Mutual Management Corp. and Standish, Ayer & Wood, Inc.
relating to Registrant's Government Money Investments Portfolio is
to be filed by amendment.

(d)(13) Investment Advisory Agreement dated October 1, 1998
between Mutual Management Corp. and Oechsle International Advisors
L.P. relating to Registrant's International Equity Investments Portfolio is
To be filed by amendment.

(d)(14) Investment Advisory Agreement dated March 3, 1994
between Smith, Barney Advisers, Inc. and John Govett & Company, Ltd.
relating to Registrant's Emerging Markets Equity Investments Portfolio
is incorporated by reference to Post-Effective Amendment No. 6.

(d)(15) Administration Agreement dated June 2, 1994 between the Registrant
and Smith, Barney Advisers, Inc. is incorporated by
reference to Post-Effective Amendment No. 16

(d)(16) Investment Advisory Agreement dated April 1, 1998
between Mutual Management Corp. and National Asset Management Corporation
relating to Long-Term Bonds Investments is to be filed by amendment.

(d)(17) Investment Advisory Agreement dated June, 1997 between
Smith Barney Mutual Funds Management Inc. and Wall Street Associates
relating to Small Capitalization Growth Investments is incorporated
by reference to Post-Effective Amendment No. 18 to the Registration
Statement on Form N-1A filed.

(d)(18) Investment Advisory Agreement dated November 18 1997 between
Smith Barney Mutual Funds Management Inc. and Westpeak Investment
Advisors, LP relating to Small Capitalization Growth Investments is
Incorporated by reference to Post-Effective Amendment No. 19 to the
Registration Statement on Form N-1A filed.

(d)(19) Investment Advisory Agreement dated April 1, 1998 between
Mutual Management Corp. and Mellon Capital Management Corporation relating
to Small Capitalization Value Equity Investments is to be filed by amendment.

(d)(20) Investment Advisory Agreement dated April 1, 1998 between
Mutual Management Corp. and Mellon Capital Management Corporation relating
to Small Capitalization Growth Investments is to be filed by amendment.
(d)(21) Investment Advisory Agreement dated April 1, 1998 between Mutual
Management Corp. and Barclays Global Fund Advisors relating to Large
Capitalization Growth Investments is to be filed by amendment.

(d)(22) Investment Advisory Agreement dated January 11, 1999 between
Mutual Management Corp. and Barclays Global Fund Advisors relating to Large
Capitalization Value Equity Investments is to be filed by amendment.

(d)(23) Investment Advisory Agreement dated April 1, 1998 between Mutual
Management Corp. and David L. Babson & Co. Inc. relating to Small
Capitalization Value Equity Investments is to be filed by amendment.

(d)(24) Investment Advisory Agreement dated June 15, 1998 between
Mutual Management Corp. and Alliance Capital Management L.P. relating to
Large Capitalization Value Equity Investments is to be filed by amendment.

(d)(25) Investment Advisory Agreement dated October 1, 1998 between
Mutual Management Corp. and State Street Global Advisors relating to
International Equity Investments is to be filed by amendment.

(d)(25) Investment Advisory Agreement dated July 15, 1998 between
Mutual Management Corp. and State Street Global Advisors relating to
Emerging Markets Equity Investments is to be filed by amendment.

(d)(26) Investment Advisory Agreement dated August 3, 1998 between
Mutual Management Corp. and Baring Asset Management, Inc. relating to
Emerging Markets Equity Investments is to be filed by amendment.

(e)(1) Distribution Agreement dated July 30, 1993 between the
Registrant and Smith Barney Shearson Inc. is incorporated by reference to
Post-Effective Amendment No. 3.

(e)(2) Form of Distribution Agreement between the Registrant
and CFBDS Inc. is incorpotated by reference to
Post-Effective Amendment No.23.

(f) Not Applicable.

(g) Custody Agreements between the Registrant and PNC
Bank and Morgan Guaranty and Trust Company dated March
3, 1995 and August 24, 1995, respectively, are incorporated by reference to
Post-Effective Amendment No. 13 to the Registration Statement
on Form N-1A as filed on November 2, 1995.

(h) Transfer Agency and Registrar Agreement between the
Registrant and The Shareholder Services Group, Inc., dated September 26, 1993,
is incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A, as filed on
December 30, 1993.

(i) Opinion of Willkie Farr & Gallagher, including Consent,
is incorporated by reference to Post-Effective Amendment
No. 13 to the Registration Statement on Form N-1A filed
on November 2, 1995.

(j) Auditors' Consent is to be filed by amendment.

(k) Not Applicable.

(l) Purchase Agreement between the Registrant and Shearson
Lehman Brothers Inc. is incorporated by reference to Post-Effective
Amendment No. 1.

(m) Not Applicable.

(n) Not Applicable.

(o) Not Applicable.

Item 24. Persons Controlled by or Under Common Control with
Registrant

None.

Item 25. Indemnification

Incorporated by reference to Pre-Effective Amendment
No. 2 to the Registration Statement on Form N-1A as filed on
January 7, 1993.

Item 26(a) Business and Other Connections of Investment
Advisors

Investment Manager - The Consulting Group

The Consulting Group and its predecessor have been in
the investment counseling business since 1973. The Consulting Group is a
division of SSBC Fund Management Inc. ("SSBC") (formerly Mutual Management
Corp.), which was incorporated in 1968 under the laws of
the State of Delaware. SSBC is a wholly owned subsidiary of Salomon Smith
Barney Holdings Inc., which is in turn a wholly owned subsidiary of
Citigroup Inc.

The list required by this Item 26 of officers and
directors of SSBC and the Consulting Group, together with information as to
any other business, profession, vocation or employment of a substantial
nature engaged in by such officers and directors during the past two fiscal
years, is incorporated by reference to Schedules A and D of Form ADV filed
by SSBC on behalf of the Consulting Group pursuant to the Advisers
Act (SEC File No. 801-8314).

Item 26.(b) Business and Other Connections of Advisors

Advisors - Standish, Ayer & Wood, Inc.

Standish, Ayer & Wood, Inc. ("SAW") serves as
investment advisor to Intermediate Fixed Income Investments and
Government Money Investments. SAW is registered as a commodity trading
adviser with the National Futures Association. SAW has been registered as
an investment advisor under the Advisers Act since 1940. SAW provides
investment advisory
services to individuals and institutions. SAW's principal executive
offices are located at One Financial Center, Boston, Massachusetts 02111.

The list required by this Item 26 of officers and
directors of SAW, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by SAW pursuant to the
Advisers Act (SEC File No. 801-584).

Advisors - National Asset Management, Inc.

National Asset Management , Inc. ("National Asset") serves as
investment advisor to Long-Term Bond Investments. National Asset has
been registered as an investment advisor under the Advisers Act since 1979
and provides investment advisory services to individuals and
institutions. National Asset principal executive offices are located at
101 South Fifth Street, 6th Floor, Louisville, KY 40202.

The list required by this Item 26 of officers and
directors of National Asset together with information as to any other
business, profession, vocation or employment of a substantial nature
engaged in by such officers and directors is incorporated by reference to
Schedules A and D of Form ADV filed by National Asset.

Advisors - Smith Affiliated Capital Corp.

Smith Affiliated Capital Corp. ("SACC") serves as
investment advisor to Municipal Bond Investments. SACC has been
registered as an investment advisor under the Advisers Act since 1982.
SACC provides investment advisory services to individuals and institutions,
and is a
general partner of, and investment advisor to, a limited partnership
primarily investment in municipal bonds. SAW's principal executive offices
are located at 880 Third Avenue, New York, New York 10022.

The list required by this Item 26 of officers and
directors of SACC, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by SACC pursuant to the
Advisers Act (SEC File No. 801-17037).

Advisors - Atlantic Portfolio Analytics & Management,
Inc.

Atlantic Portfolio Analytics & Management, Inc.
("APAM") serves as investment advisor to Mortgage Backed Investments.
APAM has been registered as an investment advisor under the Advisers Act
since 1984. APAM serves as an investment advisor to institutions.
APAM's principal executive offices are located at 201 East Pine Street,
Suite 600, Orlando, Florida 32801.

The list required by this Item 26 of officers and
directors of APAM, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by APAM pursuant to the
Advisers Act (SEC File No. 801-24775).

Advisors - The Boston Company Asset Management, Inc.

The Boston Company Asset Management, Inc. ("TBCAM") serves as
co-investment advisor to Large Capitalization Value Equity Investments.
TBCAM has been registered as an investment advisor under the Advisers Act
since 1970. TBCAM's principal executive offices are located at One Boston
Place, Boston, Massachusetts 02108.

The list required by this Item 26 of officers and
directors of TBCAM, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by TBCAM pursuant to the
Advisers Act (SEC File No. ________).

Advisors - Parametric Portfolio Associates, Inc.

Parametric Portfolio Associates, Inc. ("PPA") serves as
co-investment advisor to Large Capitalization Value Equity Investments.
PPA has been registered as an investment advisor under the Advisers Act
since 1987. PPA provides investment advisory services to a number of
individual and institutional clients. PPA's principal executive offices
are located at 7310 Columbia Center, 701 Fifth Avenue, Seattle, Washington
98104-7090.

The list required by this Item 26 of officers and
directors of PPA, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by PPA pursuant to the
Advisers Act (SEC File No. 801-29855).

Advisors - Provident Investment Counsel, Inc.

Provident Investment Counsel, Inc. ("PIC") serves as
investment advisor to Large Capitalization Growth Investments. PIC has
been registered as an investment advisor under the Advisers Act
since 1951. PIC provides investment advisory services to individual and
institutional clients. PIC's principal executive offices are located at
300 North Lake Avenue, Pasadena, California 91101.

The list required by this Item 26 of officers and
directors of PIC, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by PIC pursuant to the
Advisers Act (SEC File No. 801-11303).

Advisors - NFJ Investment Group, Inc.

NFJ Investment Group, Inc. ("NFJ") serves as co-
investment advisor to Small Capitalization Value Equity Investments.
NFJ has been registered as an investment advisor under the Advisors
Act since 1989. NFJ provides investment advisory services to a number
of individual and institutional clients. NFJ's principal executive offices
are located at 2121 San Jacinto Street, Suite 1440, Dallas, Texas 75201.

The list required by this Item 26 of officers and
directors of NFJ, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by NFJ pursuant to the
Advisers Act (SEC File No. 801-42814).

Advisors - Wall Street Associates

Wall Street Associates ("WSA") will serve as
co-investment advisor to Small Capitalization Growth Investments.
WSA has been registered as an investment advisor under the Advisers Act
since 1987. WSA is the investment adviser of various institutional clients.
WSA's principal executive offices are located at 1200 Prospect Street,
Suite 100, LaJolla, CA 92037.

The list required by this Item 26 of officers and
directors of WSA, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedule A and D of Form ADV filed by WSA pursuant to the
Advisers Act (SEC File No.801-30019).

Advisors - Westpeak Investment Advisors, LP

Westpeak Investment Advisors, LP("WSA") will serve as
co-investment advisor to Small Capitalization Growth Investments.
Westpeak has been registered as an investment advisor under the Advisers
Act since 1991. Westpeak is the investment adviser of various institutional
clients. Westpeak's principal executive offices are located at 1011 Walnut
Street,Suite 400, Boulder, CO 80302.

The list required by this Item 26 of officers and
directors of Westpeak, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedule A and D of Form ADV filed by Westpeak pursuant to the
Advisers Act (SEC File No.801-39554).

Advisors - Oechsle International Advisors, L.P.

Oechsle International Advisors, L.P. ("OIA") serves as
investment advisor to International Equity Investments. OIA has been
registered as an investment advisor under the Advisers Act since 1986. OIA
provides investment advisory services to a number of individual and
institutional clients. OIA's principal executive offices are located at
One International Place, Boston, Massachusetts 02110.

The list required by this Item 26 of officers and
directors of OIA, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by OIA pursuant to the
Advisers Act (SEC File No. 801-28111).

Advisors - Julius Baer Investment Management Inc.

Julius Baer Investment Management Inc. ("JBIM") serves
as investment advisor to International Fixed Income Investments. JBIM has
been registered as an investment advisor under the Advisers Act
since 1984. Directly and through Julius Baer Securities Inc., JBIM
provides investment advisory services to a wide variety of individual and
institutional clients, including registered investment companies. JBIM's
principal executive offices are located at 330 Madison Avenue, New
York, New York 10017.

The list required by this Item 26 of officers and
directors of JBIM together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by JBIM pursuant to the
Advisers Act (SEC File No. 801-18766).

Advisors - AIB Govett Asset Management Ltd.

AIB Govett Asset Management Ltd. ("Govett") will serve as
investment advisor to Emerging Markets Equity Investments. Govett has been
registered as an investment advisor under the Advisers Act since 1972.
Govett is the investment adviser of various institutional clients. Govett's
principal executive offices are located at Shackleton House, 4
Battlebridge Lane, London, SE1-2HR.

The list required by this Item 26 of officers and
directors of Govett, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedule A and D of Form ADV filed by Govett pursuant to the
Advisers Act (SEC File No.801-34730).

Advisors - Alliance Capital Management L.P.

Alliance Capital Management L.P. ("Alliance") will serve as
investment advisor to High Yield Investments. Alliance has been
registered as an investment advisor under the Advisers Act since 1971.
Alliance is the investment adviser of various institutional and individual
clients. Alliance's principal executive offices are located at
1345 Avenue of the Americas, New York, New York .

The list required by this Item 26 of officers and
directors of Alliance, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedule A and D of Form ADV filed by Alliance pursuant to the
Advisers Act (SEC File No.801-32361).

Advisors - David L. Babson & Co., Inc.

David L. Babson & Co. Inc. ("Babson") will serve as an
investment advisor to Small Capitalization Value Equity Investments.
Babson has been registered as an investment advisor under the Advisers Act
since 1940. Babson is the investment adviser of various institutional and
individual clients. Babson's principal executive offices are located at
One Memorial Drive, Cambridge, MA,02142-1300.

The list required by this Item 26 of officers and
directors of Babson, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedule A and D of Form ADV filed by Babson pursuant to the
Advisers Act (SEC File No.801-241).

Item 27. Principal Underwriters

(a) CFBDS, Inc. the Registrant's Distributor, is also
the distributor for
CitiFundsSM International Growth & Income Portfolio,
CitiFundsSM International Equity Portfolio, CitiFundsSM Large Cap
Growth
Portfolio, CitiFundsSM Intermediate Income Portfolio,
CitiFundsSM Short-Term U.S. Government Income Portfolio,
CitiFundsSM Emerging Asian Markets Equity Portfolio,
CitiFundsSM U.S. Treasury Reserves, CitiFundsSM Cash Reserves,
CitiFundsSM Premium U.S. Treasury Reserves,
CitiFundsSM Premium Liquid Reserves, CitiFundsSM Institutional U.S.
Treasury Reserves, CitiFundsSM Institutional Liquid Reserves,
SM Institutional Cash Reserves, CitiFundsSM Tax Free Reserves,
CitiFundsSM Institutional Tax Free Reserves,
CitiFundsSM California Tax Free Reserves,
CitiFundsSM Connecticut Tax Free Reserves,
CitiFundsSM New York Tax Free Reserves, CitiFundsSM Balanced Portfolio,
CitiFundsSM Small Cap Value Portfolio, CitiFundsSM Growth & Income
Portfolio,
CitiFundsSM Small Cap Growth Portfolio, CitiFundsSM National
Tax Free Income Portfolio, CitiFundsSM New York Tax Free Income
Portfolio,
CitiSelect VIP Folio 200, Citiselect VIP Folio 300,
CitiSelect (VIP Folio 400, CitiSelect (VIP Folio 500,
CitiFundsSM Small Cap Growth VIP Portfolio, CitiSelect (Folio 200,
CitiSelect (Folio 300, CitiSelect (Folio 400, and CitiSelect (Folio
500.
CFBDS is also the placement agent for Large Cap Value Portfolio,
International Portfolio, Foreign Bond Portfolio,
Intermediate Income Portfolio, Short-Term Portfolio,
Growth & Income Portfolio, Large Cap Growth Portfolio,
Small Cap Growth Portfolio, International Equity Portfolio,
Balanced Portfolio, Government Income Portfolio, Emerging
Asian Markets Equity Portfolio, Tax Free Reserves Portfolio,
Cash Reserves Portfolio and U.S. Treasury Reserves Portfolio.

CFBDS, Inc. is also the distributor for the following
Smith Barney Mutual Fund registrants:
Greenwich Street Series Fund
Smith Barney Adjustable Rate Government Income Fund
Smith Barney Appreciation Fund Inc.
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Concert Allocation Series Inc.
Smith Barney Equity Funds
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc.
Smith Barney Income Funds
Smith Barney Institutional Cash Management Fund, Inc.
Smith Barney Investment Trust
Smith Barney Investment Funds Inc.
Smith Barney Managed Governments Fund Inc.
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Money Funds, Inc.
Smith Barney Muni Funds
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Natural Resources Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund Inc.
Smith Barney Principal Return Fund
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Telecommunications Trust
Smith Barney Variable Account Funds
Smith Barney World Funds, Inc.
Travelers Series Fund Inc.
And various series of unit investment trusts.

CFBDS, Inc. is also the distributor for the following
Salomon Brothers funds;
Salomon Brothers Opportunity Fund Inc
Salomon Brothers Investors Fund Inc
Salomon Brothers Capital Fund Inc
Salomon Brothers Series Funds Inc
Salomon Brothers Institutional Series Funds Inc
Salomon Brothers Variable Series Funds Inc

The information required by this Item 27 with respect
to each director, officer and partner of CFBDS, Inc.
is incorporated by reference to Schedule A of Form BD
filed by CFBDS, Inc. pursuant to the Securities
Exchange Act of 1934 (SEC File No. 8-32417).

Item 28. Location of Accounts and Records

Consulting Group Capital Markets Funds
222 Delaware Avenue
Wilmington, Delaware 19801

PNC Bank, National Association
17th and Chestnuts Streets
Philadelphia, Pennsylvania

The Chase Manhattan Bank
Chase MetroTech Center
Brooklyn, NY 11245

Salomon Smith Barney Inc.
388 Greenwich Street, 22nd Floor
New York, New York 10013

First Data Investor Services Group Inc.
Exchange Place
Boston, MA 02109

CFBDS Inc.
21 Milk Street
Boston, MA 02109

Item 29. Management Services

Not Applicable.

Item 30. Undertakings

Not Applicable.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended
(the"1933 Act")and the Investment Company Act of 1940, as amended,
the Registrant has duly caused this Post-Effective Amendment to its
Registration Statement to be signed on its behalf by the undersigned,
this Post-Effective Amendment, and where applicable, the true and lawful
attorney-in-fact, thereto duly authorized, in the City of New York and
State of New York on the 9th day of July 1999.

CONSULTING GROUP CAPITAL MARKETS FUNDS

BY /s/ Heath B. McLendon
(Heath B. McLendon, Chief Executive Officer)

Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment to the Registration Statement has been
signed below by the following persons in the capacities and on the date
indicated.

Signature Title Date

/s/ Heath B. McLendon
Trustee and Chairman of the Board July 9, 1999
Heath B. McLendon (Chief Executive Officer)

/s/ Lewis E. Daidone
Senior Vice President and Treasurer July 9, 1999
Lewis E. Daidone (Chief Financial and Accounting
Officer)

/s/ Walter E. Auch, Sr.*
Walter E. Auch, Sr., Trustee July 9, 1999

H. John Ellis, Trustee

/s/ Armon E. Kamesar, Trustee, July 9, 1999
Armon E. Kamesar

/s/ Martin Brody*
Martin Brody, Trustee, July 9, 1999

/s/ Stephen E. Kaufman*
Stephen E. Kaufman, Trustee, July 9, 1999

* Signed pursuant to power of attorney filed October 29, 1993 as an exhibit
to Post-Effective Amendment No. 3.

/s/ Heath B. McLendon
Heath B. McLendon July 9, 1999